1. Budget 2018: Expect diesel sedans, SUVs to become more expensive, as focus shifts to alternative fuels

Budget 2018: Expect diesel sedans, SUVs to become more expensive, as focus shifts to alternative fuels

Budget 2018: As diesel cars chase the sunset of their existence, will the Budget 2018 see the last of the small-diesel car? As of now, we expect that mid-size diesel sedans and SUVs to get more expensive!

By: | Updated: January 31, 2018 5:09 PM

Budget 2018: Diesel cars and their respective manufacturer’s will be keenly waiting for the 2018 Budget, before they weigh in the products for the upcoming year.With Bharat Stage VI (BS6) on the horizon, diesel cars, might be of pivotal focus at the 2018 Budget,  the small-diesel car are likely to dissapear in the next two years. As mounting costs of actually building a BS 6 compliant  diesel hatch or compact sedan car will no longer allow manufacturers to sell them profitably. Which means, that over the next few years diesel hatchback and compact sedans might be replaced by Electric hatchbacks/compact sedans or even Hybrid atchbacks/compact sedans. The switch is likely to be governed by the taxation on hybrids and electric which will be governed by the union budget for the year.Either ways, Diesel sedans and SUVs that exceed the 4-meter mark are expected to get more expensive once the budget is announced. This rise in cost is expected to be mitigated by the reduction of the corporate tax, although we will have to wait for the finer details of the budget to fully fathom the  extent the ofset.

GST has removed most of the indirect taxes and while any change in the slab structure will require a nod from the GST council, the Budget 2018 will focus on allocation of funds in different sectors. For automobiles, Budget 2018 might see Finance minister giving more exemptions for Research and Development especially for electric cars. The Society of Indian Automobile Manufacturers (SIAM) believes that if India is to meet its electrified mobility goal by 2032, the government will need to include certain imported electric vehicle parts in preferential tariff list to help promote the eco-friendly technology.

Also read: Budget 2018: Expectations for vehicle buyers and how it could affect car prices

Automakers are also hopeful that Finance Minister Arun Jaitley will announce an increment in deduction on research and development (R&D) expenses, which has been reduced from 200 percent to 150 percent. India has one of the fastest growing automobile sectors and is currently ranked fifth in the world. With a market that grows at this rate and an industry that alone contributes to 7% of India’s Gross Domestic Product, it’s natural that in the run-up to the Budget 2018, the Automobile sector is likely to be big on everyone’s mind. SIAM had earlier urged the government to bring in all passenger vehicles under two distinctive tax slabs within the GST (Goods and Services Tax) as opposed to the multiple tax slabs that are currently in effect.
Tata Motors in a statement said “We expect the new budget 2018 to help boost consumer sentiments and define a tax structure that will support the overall ecosystem. Rationalization of tax slabs and reduction of cess by the Government will be a key step in this direction. A well-defined budget with a specific focus on the promotion of infrastructure will provide the much-needed Impetus to the Commercial Vehicle segment. With reference to Passenger Vehicles, we look forward to the implementation of two tax rates as opposed to the multiple tax rates levied currently.”
SIAM also seeks additional clarity on the representation of various import routes, including CKD (completely knocked down) and SKD (semi knocked down) units, and asks for no concession be given to CBU imports of EVs to support the Make in India.

The take-away from this is that in terms of passenger vehicles, the diesel car is currently chasing the sunset. Be it from an environmental perspective or from the fact that they will become increasingly difficult to sell when compared to hybrids and EVs.  Although don’t expect them to dissapear all at once, we expect that they will gradually fade away over the course of the next decade.

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