Union Budget 2023
It's that time of the year when the entire auto industry eagerly waits for the Finance Minister to take the stage. Quite a few crucial measures are expected to be announced, especially concerning the electric vehicle industry (OEMs & Supplier Base) and small and medium enterprises primarily catering to the auto component players.
The Government has also been pushing for greater self-reliance while directing future growth towards more environment-friendly technologies. Multiple green technology pathways are encouraged to reduce fossil fuel and carbon emissions. This includes incentives provided under various PLIs, and policy support extended for electric mobility, alternate fuels like Ethanol and Bio-CNG, and the recent announcement of the ambitious hydrogen mission. The policy initiatives are likely to continue from a mid-long-term perspective. The Government is also expected to continue investing in improving the quality of education and upskilling, which will help create a skilled workforce for the industry.
Sharing his views with Park+ Your Car App, Sridhar V, Senior Partner – Grant Thornton, said, "Automotive Industry is expectantly looking for measures in the Budget 2023, which will invoke a significant growth phase for 2 W and EV segment in particular since they have either not reached the pre-covid peak levels or are requiring some more push to trigger more demand. Measures will help reduce input cost through rationalising customs duty on certain components, including battery, an extension of incentives like FAME and inclusive coverage (for players below the threshold levels applied in the current scheme) of PLI scheme to small and medium players who are expected to be on the cards. Rationalising GST rates is also a long-time request, which may not be addressed in the Budget since the decision will vest with the GST council."
Even Toyota Kirloskar Motor expects a strengthening of EV infrastructure and better thrust to the rural economy where more traction is needed. Vikram Gulati, Country Head & Executive Vice-President of Toyota Kirloskar Motor, said, "Based on last year's progressive Budget and various Government interventions, the auto industry witnessed healthy growth. In the upcoming Union Budget, given the macro-economic scenario, we expect the Government to continue to retain growth orientation. Further, continued economic reforms and infrastructure upgradation along with special thrust for the rural economy and keeping a check on rising interest rates would be important for sustaining good demand."
The Society of Manufacturers Of Electric Vehicles (SMEV) too is expecting a reduction in GST rates from 28 per cent to a uniform rate of 5 per cent on EVs. As of now, EV buyers pay 5 per cent GST only on batteries while the rest is charged at 28 per cent. "The momentum in the electric vehicle industry has been building positively. In the last few years, we have witnessed increased demand for EVs. Customers have accepted the technology, and the industry is ready to take off. All this time, the Government has shown its commitment to promoting and prioritising electric mobility. Its initiatives, such as the FAME scheme, which emphasises demand creation, have provided the right platform for the industry. However, other initiatives like R&D for localisation, supply-side support, charging infrastructure, and consumer awareness programmes could not take off due to the nascent stage of the industry, the non-availability of resources to attract investment, and COVID. Hence, at this juncture, we must focus on building a strong EV ecosystem that could make the EV industry self-sustainable."
Even tyre manufacturers in the ancillary industry expect production-linked incentives, duties, and tax rate reductions. "As we come to the Budget, we are looking at certain things in the Tyre Industry, we would like remission of duties and taxes with relation to exports to apply both to SEZ and EOU. Second is, Production Linked Incentive Scheme to be introduced for tyres as we see big opportunity over there for the growth," Atul Bansal, CFO of Yokohama India, said.
In a nutshell, the Government plans to reduce the customs duties on auto components and increase the availability of credit and finance options for buyers. The Government also intends to provide a 20 per cent tax incentive on electric vehicles, promoting their further adoption. Such measures are expected to reduce automobile prices and provide more affordable options for buyers.