The auto industry that went through slowdown for most of last year would need a big push from Finance Minister Arun Jaitley in the Budget later this month, in order for the industry to be back on a growth trajectory, global advisory firm Grant Thorton said on Friday.
On top of Grant Thorton's wishlist is for excise duty on automobiles to be cut and brought back to December 2014 levels.
In the interim Budget last February, the previous UPA government had cut excise duty on cars, SUVs, two-wheelers and consumer durables in order to boost the two sectors that were struggling due to economic downturn.
Excise duty on small cars, scooters, motorcycles and commercial vehicles was reduced to 8 per cent from 12 per cent previously. For SUVs, it was cut to 24 per cent from 30 per cent; for mid-sized cars, to 20 per cent from 24 per cent and to 24 per cent for large cars from 27 per cent.
In June, the Narendra Modi government extended the excise duty concessions by six months to December 31, 2014. The auto industry wanted further extension of the duty relaxation, but the NDA government decided against it.
Subsequently, with excise duty back on pre-February 2014 levels, auto manufacturers hiked prices of vehicles.
"Restore excise duty back to the December 2014 levels for auto manufacturers - this would keep the cost of ownership down for the ultimate owners and increase the interest for new buys," the advisory firm said.
Auto component manufacturers too need be given some relief, which in turn would also make exports more competitive, it said.
"To encourage component manufacturers, the government should look at reducing excise duty from 12 per cent to 10 per cent or lower, including for plastics and polymer parts manufacturers. This is also expected to make vehicle exports competitive."
Auto industry body SIAM or Society of Indian Automobile Manufacturers believes sales could see a 7-8 per cent growth during the calendar year ending December 2015, if the excise duty is indeed cut. It has been lobbying for an excise duty cut in the Budget.
In the scenario that there is no cut, auto sales growth is seen at around 3 per cent, it said.
In the Budget, Mr Jaitley should provide more sops for hybrid/ alternative fuel for vehicles, to increase the marketability and usage of these vehicles to improve environment and the economy by bringing down fuel imports, Grant Thorton said.
"(There should be) continuation of the tax incentives from the Budget for 2014-15 like investment allowance, duty cuts for hybrid vehicles/ parts, R&D tax exemptions etc," the advisory firm said.
The Budget should also have a policy around scrapping old vehicles - 15 years and above, along with the infrastructure needed to scrap, it said.
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