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Budget 2019 Impact on Passenger Car Prices, Future Explained

Budget 2019 Impact on Passenger Car Prices, Future Explained

Budget 2019 came with thrust on Future which is of Electric Vehicles. But the present context Vehicles run on Petrol, Diesel, CNG comprising 99.9% of Car Sales gets the beating with Cess, Custom

 

Budget 2019 Impact on Cars

Budget 2019 comes with positive hopes as its theme on Automobiles remains around setting future to be of Electric Vehicles

  • GST reduced on Electric Vehicles from 12% to 5%. This can help in road map of Electric Cars with further investment from Manufacturers, been Government charges 28% GST on both Petrol, Diesel, CNG Fitted Cars.
  • To boost affordability of Electric Cars - an incentive came for upto Rs 1.5 Lakh Interest Deduction from Income Tax in a Financial Year. So for instance if a person takes loan on Tata Tigor EV for 8 Lakh loan then he can claim deduction of Rs 70,000 as interest paid from his income bring maximum tax liability to almost Rs 23,000. While for some one who buys Hyundai Kona with 20 Lakh loan can claim in maximum deduction of Rs 1.75 Lakh interest in 1 year bringing tax liability down by Rs 55000 approx
  • For making Electric Cars affordable in India - custom duty been slashed completely for cars manufactured in India and even upto Rs 10,000 crore subsidy granted for across electric passenger car class
  • An investment of Rs 1000 crore announced to set up Electric Car Charging Infrastructure across cities in India.

As can be seen for thrust on Electric Vehicle Future 

 

Existing Cars sold in India - Budget 2019 Impact

Now comes reality - Automobile Industry is already struggling with

  • Low sales with Profitability Growth rates are lower
  • Inventory pile up
  • Challenge in terms of upgrading technology to BS6 Compliant where especially in Diesel Engine need higher up investment
  • Higher Petrol and Diesel Prices (where taxes eats up to almost 50% of cost of Petrol) due to which Millenials are Shifting Pattern towards Cabs
  • Increased Competition not only within segment but across other segment cars. Challenges as time line to upgrade car and making changes turned much quicker to keep the product alive

And with the fact that market Share of Electric Cars in India is not even .1% - yes 99.9%+ cars sold in Indian Market as of now pertains to Petrol,Diesel,Hybrid, CNG and LPG and no respite for them is a further down point for Automobile Sector

Negatives of Budget 2019 for Passenger Cars

  • Excise Duty and Road Infra Cess of Rs 2 per Litre announced on Petrol and Diesel Fuel in Budget 2019 which along with state taxes leads to final hike of Rs 2.5 per Litre on Petrol and Diesel Fuel Prices
  • No GST Framework announced on Petrol and Diesel 
  • Fact that Passenger Car Manufacturers are going to shift to BS-6 Compliant engine as across from April 2020 - for some luxury brands it comes as further negative been Custom Duty enhanced on Catalytic Converter, Fuel Filter, Oil Filter, Intake Air filter along with hike in custom duty on imported locks, glass mirror and horns. Hiking Custom Duty on expensive component like Catalytic Converter will impact the prices of Luxury Brand Manufacturers
  • Even the budget was silent on VVMP (Voluntary Vehicle Modernization Plan) as incentive to car owners running on old BS-3 or BS-2 Cars to opt for BS-6 Cars with rebates on GST. Been is evident that PM and Nox levels are higher on driving old BS-3, BS-2 Compliant Cars - a scheme of upgrade to BS6 with some benefits on rebate on GST front would have certainly added a trigger to Auto Sector Sales.

Overall to conclude its a budget for Automobile Sector which came to set mood for future by missing on the Present state of Automobile Sector

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Sunday, 22 September 2019

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