Budget 2020 expectations from two-wheeler industry: ‘Reviving rural economy can help tackle current slowdown’

The PM Narendra Modi-led government will present the 2020 Budget on 1st February, and many are expecting FM Nirmala Sitharaman to announce support for localisation of battery tech, reconsider GST component in tyre pricing, etc.

By:Updated: Jan 20, 2020 12:07 PM
Two Wheeler sales: Royal Enfield sales down 13 percent in December; hero motocorp, tvs and bajaj auto too record decrease in salesImage: Reuters

From two-wheelers to commercial vehicles – one of the worst sales slumps witnessed by the auto industry affected almost all vehicle manufacturers last year. The reasons behind the slowdown included an overall low consumer sentiment, and the upcoming transition to BS-VI emissions standards as well. The industry is now hopeful that the government will come up with favorable policies and incentives to boost demand. The PM Narendra Modi-led government will present the first budget of its second term on 1st February, as many are expecting Finance Minister Nirmala Sitharaman to announce a reduction in GST on EVs, support localisation of battery technology, reconsider GST component in tyre pricing, etc. Electric two-wheeler startup Evolet and TVS Eurogrip have this to say in their pre-budget expectations:

TVS Eurogrip – P Srinivasavaradhan, President, TVS Srichakra Ltd

“Corporate Tax Rate cut along with a reduction in GST on electric vehicles were some of the few welcome steps initiated by the government last year. For the coming year, we urge the government to address the supply-demand gap in natural rubber a critical raw material of the tyre industry. We request the government to reconsider the GST component in tyre pricing, also relook at relaxation in GST for two-wheelers. Steps to curb rising raw material and fuel prices will aid both vehicle manufacturers and auto component makers in the long-term. Some of the other focus areas are to strengthen the required road & transport infrastructure. Reviving the rural economy can help tackle the current slowdown.

While the government is taking steps to improve the supply of goods & services, we expect the government to take steps to increase the demand by making more liquidity portion available in the hands of consumers.”

Okinawa Autotech Pvt Ltd – Jeetender Sharma, Founder & MD

“The revival of the automobile industry is expected to be on the priority list in the upcoming Budget session. Low market sentiment and the transition to BS-VI emission standards were said to be the prime reasons for the industry slowdown last year. The industry is hopeful that the government will announce policies to support the industry and increase the demand in the market.

“Another buzzing word is about the growth of the electric vehicle segment in India. EV revolution has certainly picked up well in India. The government has also fuelled the market with subsidies and incentives to accelerate adoption. However, the cost of components and import duty remains a big concern for EV manufacturers. Certain parts of products are still imported, due to lack of manufacturing facilities, and this forms a major part of the overall product cost.”

Evolet- Rissala Electric Motors Pvt Ltd – Sqn Ldr Prerana Chaturvedi, CEO & ED

“The long-term benefits of EVs are multi-fold still the relatively higher cost of acquisition of an EV is a bottleneck in its adoption. Unarguably, lowering the GST on electric vehicles from 12% to 5% has benefited electric vehicle manufacturers. However, GST on raw materials is still a concern for manufacturers in addition to the import duty on technologies for e-drivetrain and other EV related products. The government needs to do more to support the localization of battery technology that power electric vehicles. Lithium-Ion Batteries that form close to 40% of the cost of an electric vehicle attract GST of 18%.

“The government should consider reducing the GST rate and encouraging companies to set up battery manufacturing plants in the country through tax exemptions. For startups it will be a great deal if the government does some kind of tie-ups for Li-ion cells companies, Electronics parts companies which can reduce down the cost and MOQ for the raw materials. Also unlike the conventional automobile sector, financing has been a major concern for the EV industry as Nationalised banks are currently not offering any financial help over electric vehicles. I think if the government solves the financing issue, it will aid in meeting the target of E mobility 2030 set by the government.

Budget 2020 expectations: Automobile industry hopeful for right incentives for EVs, reduction in GST

“Also there’s a lack of the right engineering talent in the country in building an ecosystem for electric vehicle and battery manufacturing. The government should encourage private players to invest in more such research and development projects with Tier I and II universities and campuses across the country. This will build local talent and reduce our reliance on other countries for the import of advanced electronics and battery technology.”

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