Budget 2018 for Petrol and Diesel Vehicles: On the face of it, it might have seemed that Finance minister Arun Jaitley steered clear of any announcements in the Automotive sector. However, a little introspection reveal some indirect changes to the Automotive industry. With the focus on rural empowerment ahead of the 2019 Lok Sabha polls. The Budget 2018 on the whole, however, seems to been a disappointing given that the Market as a whole crashed while Mr Jaitley was halfway through his speech.

Budget 2018: Entry Level Cars, LCVs, Two wheelers and Tractors might see growth

The budget 2018 had an almost direct focus on farms and farmer with the launch of the Rs 500 Crore Operation Green and an additional allocation of Rs 2000 crore to boost rural infrastructure. Not to mention a 150% hike to MSP of kharif. Together, they will increase the buying power of people in rural areas, meaning that two-wheelers, tractors, entry-level cars and light commercial vehicles is likely to grow over the course of the next year.

Budget 2018: 35,000 Km of Roads & 20% hike in Infrastructure spending on Highways

The Budget 2018 focused on the construction of 35,000 kms of road under the Bharat Mala scheme, which will see an expedited delivery date. In addition to a 20% hike in the spending on highways and roads. This kind of infrastructure building will have a positive effect on the likes of the heavy machinery industry. Good news for JCB, CAT and other construction and land moving vehicles. As for better connectivity through roadways courtesy an additional 1 lakh crore targeted at boosting infrastructure will lower cost of logistics and thereby have a positive multiplier effect on the economy.

 

Budget 2018: Make-In-India boosted by added tax on imported components

The additional customs duty paid on imported components is a not so well shrouded target at bolstering the Make-In-India scheme, this may boost the component industry in India in the long term. As for the short-term effects, we do not expect that this will affect prices across the spectrum in a big way.

 

Budget 2018: Rs 2 Price cut of Petrol and Diesel

Now, this is one of the more convoluted talking points of this budget considering that the price reduction only applies to unbranded fuel. So while it may seem like this will affect the automotive industry, its really a moot point considering that all the fuel that we consume is branded. However, holistically speaking this might have an overall positive effect in a temporary capacity.

 

Budget 2018: NO BS6 Petrol and Diesel car R&D Incentives

Interestingly, the Budget 2018 has steered clear of a few sensitive areas as far as the Automotive Industry. First on the list, is the much-awaited relief on R&D investment in the automotive sector which was supposed to bolster the production of BS6 vehicles by 2020 not to mention the government’s 2020 goal.

“The Budget 2018 announced by the Finance Minister is largely populous, aimed at uplifting the rural economy and enhancing the infrastructure in the agri sector. The Government’s initiative to increase rural credit will have a positive impact on the demand for Tractors and other Commercial vehicles which are used for agriculture, at the same time the discerning rural users will also aid the growth of two-wheelers and other vehicles especially hatchbacks and SUVs. With these macro changes, digital/ online mediums will play a significant role in bringing buyers & sellers closer, ultimately resulting in growing the automobile market in the tier 2 & 3 cities.” Sunny Kataria, Director, Automobile Category, OLX India.

 

President ACMA, Nirmal Minda, said, “The Budget unveiled by Finance Minister is indeed inclusive and pro-manufacturing. The component sector is delighted that the duty on select items such as engine & transmission parts, brakes and parts thereof, suspension and parts thereof, gear boxes and parts thereof, airbags etc. have been enhanced from 7.5/10% to 15%. These items account for more than 50% of USD 43.5 billion domestic component industry’s turnover and over 30% of its USD 11 billion exports. The industry is extremely competitive in these areas and this measure will not only encourage investments but also encourage technology development in these areas.”

Jerome Saigot, MD, Nissan India, said, “Union Budget 2018-19 is a reaffirmation of the government’s commitment to sustainable economic growth. The sustained focus on building road and transport infrastructure, skill development and job creation will help in in creating a positive mood in the economy. The stimulus to the agriculture and rural infrastructure will further drive consumer demand in the rural markets benefitting the auto sector and economy overall.”