Union Budget 2018: How it affects the auto industry

The Union Budget 2018 is out. And the benefits that it brings to the automotive industry are – drum roll please – none!

Sure, there are some indirect gains owing to tax deductions in other areas. But, overall, it seems like the Finance Minister, Arun Jaitley, has conveniently turned a blind eye to the automobile industry in his 2018-19 budget.

Let’s discuss the good bits of the newly drafted budget first. As per the new budget, there will be a 25 per cent tax rebate for corporate companies that have an annual turnover of over 250 crore rupees. Given the fact the virtually all the auto manufacturers have an annual turnover higher than that value, the end-customer may get the benefit – if automakers intend to pass it on, that is.

The government has also proposed to build 9,000km of new highways across the country this year. In addition to that, the government will spend as much as Rs. 16,000 crores on rural electrification. How does that help the industry? Well, sooner or later, electric cars will hit the Indian roads big time, and so, it’d be better to have an infrastructure ready well before time.

That said, there still aren’t any significant incentives in place for electric or hybrid vehicles. The Finance Minister also hasn’t mentioned anything about restructuring the current GST structure for hybrid cars. So, that means the hybrids will continue to be taxed as per the current GST structure.

Additionally, the custom duty on imports or CBUs (completely built-up units) is set to rise by 5 per cent to 25 per cent. Expect high-end luxury cars from the likes of Ferrari, Bentley, Lamborghini and Volvo to get a decent price hike. High-end motorcycles like the ones coming from Ducati, Harley-Davidson, Triumph and BMW Motorrad will also receive a significant bump in their prices.

And it doesn’t stop there. Locally assembled products are also going to get dearer since the custom duties on auto components sourced from outside the country are also going to increase by 15 per cent! Since all the automobiles use some or other component that’s made outside, there’ll be a sure-shot increase in prices across different segments.

Overall, the Union Budget of 2018-19 is hardly going to have any positive impact on the growth of the industry. To tell the truth, it’s a bit of a downer . . .