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Budget 2021: Expectations of the Auto sector

Before the Finance Minister Nirmala Sitharaman presents the Union Budget in the Parliament on February 1, 2021.

Here’s what the Auto sector expects from Finance Minister Nirmala Sitharaman:

Jeetender Sharma, Founder & Managing Director, Okinawa Autotech:

“2021 can prove to be a revolutionary year for the electric vehicle (EV) industry. We have high hopes from the union budget this year and are optimistic that the government will continue to take the right steps to place India on the global EV map. With that said, we urge the finance minister to reconsider the current taxation framework applicable on raw material and the final product in case of EVs. While the GST input on raw material is 18%, the tax on outward supplies currently stands at 5%, leading to an implicit inverted duty structure for us (manufacturers). This move could help in optimizing the cash flows.

The central government’s recent move to extend the PLI scheme to the automobile sector including for manufacturing of Advanced Chemistry Cells (ACC) is commendable. While this will definitely give a boost to local manufacturing, better yet, the government must also look at aggravating the domestic demand by further incentivising individual and commercial consumption of EV pan India. Such a holistic approach would create a thriving ecosystem for EVs and cement India’s position as a global EV hub offering abundant opportunities for growth and attracting huge investments for further innovation.”

Tarun Lawadia, Founder & CEO, PumPumPum:

“Auto industry has always been a key contributor to India’s economic growth and job creation. We expect the upcoming Union Budget to be a game-changer for all the sectors especially the worst-hit auto sector. India’s automotive growth story is waiting for the much-needed booster shot from the upcoming Union Budget 2021. Relief in the direct and indirect taxation, reduction of GST rates on vehicles, enhancing the disposable income of the salaried class, further incentives to make the auto manufacturing Atmanirbhar, incentivising EV manufacturing along with various policy-level initiatives can spur consumer demand and motivate the sector to drive faster on the road to recovery.

Steps to curb rising raw material and fuel prices will aid both vehicle manufacturers and auto component makers in the long-term. In addition the budget should encourage the startup ecosystem for new consumer trends such as used car leasing, car rental, car subscription models etc. which are going to be the promising industries of the future and can boost the growth of Indian auto sector. As the pandemic has pushed the need for personal mobility, a huge population of first time vehicle buyers can be attracted by making cars cheaper by temporarily reducing the GST rate to 18% from the existing 28% and reducing the compensation cess rates. The government’s recent announcements on the promotion of EVs in India, especially for government use and public transport, is encouraging. The need of the hour is to put right policies, incentives, and charging infrastructure in place so as to introduce more and more EVs on the road.”

Rushi Shenghani, CEO & Founder, Earth Energy EV:

Hoping for a huge opportunity in the sector to get localized, we are keeping up our expectations high on this year’s Union Budget, which will certainly bring up advancement in the sector. We expect the government’s Atmanirbhar Bharat Abhiyan to get more incentives as it aims to inspire companies and see India’s green mobility growing. To further support the localization of battery production which accounts for around 40 percent of the EV development cost, the government can reduce the GST on batteries as well as import duty slabs. It presently incorporates the GST of 18 percent on lithium-ion batteries and 28 % on lead-acid batteries. The cost of an EV can come down significantly with the GST reduction. Also, the Govt should finalize its incentives-based scrappage policy which can help create demand in the commercial vehicles (CV) segment as well.

Rajat Verma, Founder, Lohum:

We believe import substitution is critical if we want e-mobility to be sustainable. Over 5-10 billion dollars can be saved if we produce raw material from recycling. The government should adopt fiscal policies that encourage recycling. Further, we see gaps in the battery ecosystem which is one of the costliest components of EV. Lithium-Ion Batteries need to have a 5% GST regime to normalise them with EVs. Finally, we absolutely appreciate the government’s execution of FAME 2 (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles). Subsidies are helping the ecosystem considerably and we would want the government to extend this scheme to 2025.”

Sasidhar Nandigam, Co-founder & CSO-  CredR:

“We are eagerly awaiting this year’s budget and expecting some critical reforms this year, especially in the wake of the pandemic. 

We expect the FM to revive the automobile industry which has been badly affected by low consumer sentiment and COVID. Last year, we saw a huge spike in the demand for used bikes which till now has been sustained. 

We also expect the Government to reduce the GST which is presently 18% so that there is an increased consumption of used bikes. 

This way, people can afford bikes and numbers would increase eventually. Any steps to reduce the cost of the acquisition of PVs will help. Reduction in road taxes/registration taxes will help. Any step that helps revival of economic growth and GDP will help the passenger vehicle segment. 

Lucrative financial schemes and plans can add to the increased purchase power of consumers. Government has to look at the additional cost involved with regulatory changes and postpone the introduction of new norms accordingly, till the industry comes to a certain level.”

Rajeev Kapur, President, Two-wheeler Helmet Manufacturer Association and MD, Steelbird Helmets: 

“Government should keep working on the road safety so that millions of important lives can be saved. The prices of safety gear and helmets which help in saving the lives of pillion riders should be lessened. The GST on helmets is 18% which should be reduced to 5% or 0.

Affordable Helmets will save millions of lives as people won’t opt for cheap fake ISI helmets but affordable good quality helmets.

I would also suggest the GST should lessen on the things where the labor and the handwork are more as a larger number of people will be employed by this move. This will not only help in better employment rate but also our country’s economy will rise.”

Vimal Singh, Founder & CEO, ReadyAssist:

India should heavily invest in our youths in building the right talents. Road safety must be brought to the mainstream with an allocation of funds for awareness, setting up emergency response ecosystems, and improving highway safety and infrastructures. 

Domestic tourism should be empowered, housewives should be encouraged and incentivized to become brand ambassadors of local tourism. Riders and the bloggers/vloggers communities should be recognized as they play a large part in our local tourism.”

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