Auto industry executives expect this year’s Union Budget to provide immediate relief to the ailing commercial vehicle (CV) industry. Sales of medium and heavy commercial vehicles had dipped 33 per cent in 2008-2009.
The Interim Budget in May this year had extended the depreciation benefit on purchase of new commercial vehicles to September from March 2009.
Industry executives said this should be extended as sales of large vehicles slumped 40 per cent in April and May this year.
“The other issue we expect the Budget to address is investment in infrastructure. Once this happens, the demand for commercial vehicles used in the construction industry will pick up. In addition to providing incentives for scrapping old trucks and lorries, which not only pollute but also pose safety risks, the Budget could provide funding for an integrated public transportation system. This will boost demand for buses,” said R Seshasayee, MD of Ashok Leyland.
Manufacturers of passenger vehicles say that given the negligible growth in sales of cars and utility vehicles last year — the growth was a mere 0.13 per cent — the Budget needs to tackle two anomalies in the system. “Additional taxes on large cars need to be rationalised in line with the excise duty on small cars,” said Masahiro Takedagawa, president and CEO, Honda Siel Cars. While small cars attract 8 per cent excise duty, the effective manufacturing duty on large cars and utility vehicles is 22-24 per cent. A company executive said since utility vehicles like Safaris and Maxx were widely used in rural areas where public transport was underdeveloped, it didn’t make sense to impose such high taxes on these vehicles. “The other issue impacting car sales is the different VAT rates that states levy,” said Ankush Arora, vice-president, marketing (sales) of GM. For instance, the VAT rate on cars in New Delhi is 12.5 per cent, while in other states, it is 15 per cent.
Large exporters, like Hyundai, want the Budget to provide export sops. They say the Budget could include small cars in the focus product scheme for exporters.
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Auto parts manufacturers say the import duty for certain components stands at 7. 5 per cent. “This has to be raised to the general taxation rate of 10 per cent,” said Jayant Davar, MD of Sandhar Technologies. Davar said the Budget could provide incentives such as tax holidays and lower tax rates to promote auto ancillary manufacturing parks.
In an effort to promote domestic R&D in the auto industry, the government had earlier proposed 150 per cent weighted deduction on R&D investments by companies. This is effective till 2011. “This benefit has to be given for a period of 5-10 years, which will help automobile manufacturers plan their investments,” said Venu Srinivasan, CMD of TVS Motors and the current president of the CII.