Updated: Auto Industry’s Reactions to Excise Duty Cut in VoA Interim Budget 2014

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Auto Industry leaders

The recent announcement of excise duty cut on cars and two-wheelers by the Finance Minister during the interim budget 2014 came as a big relief to the auto industry which was going through turbulent times of late. The reduction of excise duty will reduce the prices of mainstream auto products, and help provide some momentum to car sales witnessing stagnation, even slump. The Auto industry has welcomed the government’s move in general. Here we have the reactions and analyses from some of the most noted institutions and personalities of the auto industry.

Vikram Kirloskar – Society of Indian Automobile Manufacturers (SIAM)

Vikram Kirloskar SIAM

Mr. Vikram Kirloskar, President, SIAM has welcomed the announcements made by the Finance Minister in the Vote on Account presented today. SIAM would like to thank the Finance Minister for recognizing the need for a more moderate tax structure for the automotive industry and for accepting SIAM’s tax related recommendations, he said.

We believe that this reduction in Excise Duty would reduce the acquisition price thereby making vehicles more affordable which would improve the consumer sentiment and hopefully revive the demand for vehicles, Mr. Kirloskar added. The Automotive industry is the engine of growth for the manufacturing sector as a whole as it supports key industries like auto-components, capital goods, raw materials, electronics, chemicals, plastics, software etc. Revived growth in the automotive industry would have significant positive impact on these key downstream and upstream manufacturing sectors that largely depend on the performance of the auto sector. This could hopefully herald a revival of the manufacturing sector in the days to come, Mr. Kirloskar said.

Mr. Rakesh Srivastava, Sr. Vice President, Sales and Marketing, HMIL

“The reduction in Excise Duty would substantially reduce the prices, making cars more affordable. The quantum of benefit will vary from Rs. 10,000/- to Rs. 1,35,300/- across all the models. Hyundai Motor India Ltd will extend the benefit of these excise duty cuts to customers with immediate effect & will also support its dealerships suitably.”

ICRA analysis on Interim Budget 2014-15

The reduction in excise duty on automobiles is a positive for the sector as it will bring down the prices of vehicles across all segments and thereby support demand. For instance, reduction in excise duty could bring down the cost of Passenger Vehicles by Rs. 15,000-46,000 and that of commercial vehicles by Rs. 19,000-42,000 per vehicle (assuming OEMs pass on the benefit completely). While in the passenger car, two-wheeler segment the price reduction should help demand in the near term through ‘positive’ sentiment effect; in the commercial vehicle segment, the reduction may provide relief to the industry currently reeling under high discounts. In the longer term however, a sustainable demand recovery in the automobile industry would be contingent on improvement in the overall economic environment.

Sumit Sawhney- Country CEO and Managing Director for Renault in India

Sumit Sawhney Renault

Indian auto industry has been going through a rough patch lately, although we saw some positive sentiments at the recently concluded 12th Auto-expo. Slowing GDP, high interest rates, and general bearish consumer sentiment has put the sector on the slow lane. In that light, government’s move to reduce excise duty will provide a much-awaited impetus to the sector. We welcome this move and look forward to the step being part of the government’s long-term strategy for sustainable growth for the industry.

Mr. Eberhard Kern, Managing Director and CEO, Mercedes Benz India

Mr. Eberhard Kern, MD& CEO Mercedez Benzi India at the launch of new E Class -3

We welcome the Indian government’s interim budget announcement to reduce duty on cars and SUVs and expect this to significantly boost the automobile industry. Mercedes-Benz shall pass on the best possible price benefit to our customers in spite of volatile foreign exchange movements.

Mr. Sunil Rekhi, CFO, Nissan Motor India Pvt Ltd

It is a welcome move for the Economy, particularly for Auto sector which is looking for strong support from the Government for a growth stimulus as it is struggling with the negative growth for most part of this year. As Auto Sector is the backbone for economic growth in terms of huge employment provider, through its entire value chain starting from Tier N Vendors to end retail sector and related industries including Financial/Logistics/Services/Infrastructure.

We believe that this reduction in Excise Duty will reduce the acquisition price. Thus making the vehicles more affordable which should improve the consumer sentiment and hopefully revive negative growth for vehicles.

Excise duty cut reduced for the period up to 30th June 2014.
Small Cars 4%
Medium Cars 4%
SUVs 6%
Large Cars 3%

Nissan customers would enjoy the benefit of the excise cut for its cars, Micra, Micra Active, Sunny, Terrano, Evalia and Teana models.

Hero Motocorp
Hero Motocorp dare Scooter Auto Expo 2014 (4)
We have decided to pass on the entire benefit of the excise duty cut to our customers. We have judiciously spread out the price cut across our product portfolio ranging from 2% going up to 5% with the maximum ‎reduction being Rs 4500.

Mr. Shirish Kulkarni, Chairman DSK Hyosung

Shirish Kulkarni- Chairman, DSK Motowheels Hyosung (1)

We at DSK Hyosung welcome this change which comes as a great relief to the Automobile Industry that has been suffering from negative growth. We will ensure that the benefits of reduction in excise duty from 12% – 8% are made available to our customers. We are sure relaxation on excise duty in this interim budget will foster and stimulate the growth in the entire automobile sector. Our concern lies in the fact that the duty shouldn’t be changed post elections. This benefit has to be sustained until the entire automobile sector reflects a growth back to 12 % – 15% at least.

Harish Laxman, President, Automobile Component Manufacturers’ Association (ACMA)

ACMA, the apex body representing India’s auto component sector, welcomed the announcement on reduction of Excise Duty in automotive sector. Further, the industry body expressed satisfaction on the focus on infrastructure development, education, skilling, infrastructure development and attracting investments in manufacturing. It also appreciated the measures announced for sustaining growth and scaling-up of the manufacturing sector, in particular the MSMEs.

Congratulating the Union Finance Minister, P Chidambaram, President ACMA, Harish Lakshman, said, “We are glad that the Hon’ble Finance Minister, given the circumstances, has unveiled a pragmatic budget. ACMA welcomes reduction in Excise Duty on Vehicles – CVs, Small Cars and Two-Wheelers from 12% to 8%; on SUVs from 30% to 24% and on large and mid-sized cars from 27% to 24% and from 24% to 20% respectively. The automotive industry has been reeling under significant pressure for quite sometime now, the announcement on reduction in excise duty is timely and will help boost the sagging morale of the automotive sector. Further, the reduction in excise duty on Capital goods from 12% to 10% will stimulate the industry for higher investments in manufacturing.”

Lakshman further added, “The auto component industry in India aspires to be one with its own design and engineering capabilities, setting up of an exclusive Research Funding Organisation is a step in right direction and will motivate the industry in realising this vision.”

Dr Pawan Goenka, Executive Director & President (AFS), M&M

Dr Pawan Goenka

“We are delighted at the steps taken to boost manufacturing sector and especially the auto industry. From where the industry is today, the budget announcements are quite positive and should give relief to the auto industry by boosting demand. If these initiatives are maintained in the final FY15 budget, it should be a much needed positive stimulus for overall manufacturing sector in India”.

Mr Pravin Shah, Chief Executive, Automotive Division, M&M

Pravin Shah_Mahindra & Mahindra

“We are delighted at the Interim Budget announcements which have been taken to boost the manufacturing sector and especially the automotive industry. These announcements are positive and should help the auto industry witness some turnaround. Mahindra welcomes the reduction in excise duty in automobiles across the product range including the SUVs”.

Sachin Menon – National Head of Indirect Tax, KPMG in India.

“Vote on account gave the much needed relief to the capital goods, consumer durables and Auto sector at a time when the demand is low. this would spur the demand in the interim provided the benefit is passed on”

” Manufacturing productivity was low for the past few months and with the concessions for capital goods, auto and consumer durables we hope to increase demand and there fore productivity”

Mr. Anirudh Bhuwalka, MD & CEO, AMW Motors Ltd.

Anirudh Bhuwalka, MD and CEO, AMW Motors Ltd

“The cut in excise duties is a welcome step for the commercial vehicles industry, which is facing one of its worst crises in several years. However, unless the overall economic situation improves, we feel this will only have a marginal impact on driving demand. As the CV industry is closely linked to economic development, there are still too many uncertainties in overall policy and implementation measures to lift the sentiments of customers”.

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