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Run up to the Budget: Automobiles sector
The automobile sector is
broadly divided into passenger cars, two wheelers and commercial vehicles
Tax Structure
Customs Duty* (%)
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Item
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1999-2000
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2000-2001
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Two Wheelers
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40
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35
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Motor Vehicle
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40
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35
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Commercial Vehicle
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40
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35
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Tractors
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40
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35
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*Basic
Excise Duty (%)
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Item
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1999-2000
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2000-2001
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Two Wheelers (<75cc)
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16
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16
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Two Wheelers (>75cc)
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24
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24
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Motor Vehicle
(Up to 6 seater plus driver)
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40
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40
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Motor Vehicle
(7 to 12 seater plus driver)
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30
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32
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Motor Vehicle
(13 seater and above)
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16
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16
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Commercial Vehicles
(other than petrol driven)
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16
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16
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Tractors (<1800cc)
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8
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16
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Tractors (> 1800cc
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16
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16
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Background
- It has been a year of
gloom for the automobile sector with a significant downturn witnessed during
FY 2000-01 in all segments except for motorcycles and Light Commercial Vehicles
(LCV).
- During Apr-Dec 00, sales
of cars (including Multi-Utility Vehicles) fell by 6.3%. Sales of Heavy Commercial
Vehicles (HCVs) fell by 23% and that of tractors fell by 7.6%. However, car
sales experienced a 7% growth in Jan 01.
- The two wheelers industry
has recorded a marginal 3.4% growth in sales mainly due to buoyant trends
witnessed in the motorcycle segment. There has been a substantial decline
in the scooter segment in this fiscal year.
- The Quantitative Restrictions
(QRs) on automobile sector will be lifted from 01/04/01. Cheap imports from
China and Europe are expected to further add to the woes of Indian automobile
manufacturers. Imports of used vehicles will pose huge challenge to the domestic
industry. Future course of events would be largely determined by the degree
of duty protection that the Finance Minister offers to the passenger car segment
in this budget.
Previous budget (FY 2000-01)
announcements
- Excise duty remained
at 40% for cars. For Multi-Utility Vehicles the excise duty was increased
from 30% to 32%.
- Customs duty for cars
was reduced from 40% to 35%.
Pre-budget Industry Wish
list
- Confederation of Indian
Industry (CII) has recommended that for cars up to a carrying capacity of
6 persons, excise duty should be reduced from the present level of 40% to
32%
- As a protective measure
in the wake of new WTO regime, the industry has demanded imposition of customs
duty of 70% instead of the present 35% on Completely Built Units (CBU)/Semi
Knocked Down (SKD) units of new vehicles.
- Manufacturers of below
30HP tractors have demanded a reduction in excise duty to the earlier level
of 8% from which it was increased to 16% in the previous budget.
- Auto Component Manufacturers
Association (ACMA) has sought a level playing field by removal of inverted
customs structure of auto components. Presently, raw material for auto component
manufacture is maintained at peak rate while the imported components are not
charged at the peak rate.
Expectations from the Budget
No rationalisation
measures are expected.
Key Players
Ashok Leyland,
Bajaj Auto, Bajaj Tempo, Daewoo Motors, Eicher Motors, Escorts Yamaha Motors,
Fiat India, Ford India, General Motors India, Hero Honda Motors, Honda
Siel Cars, Hindustan Motors, Hyundai Motors India, Kinetic Motor, LML, Mahindra
& Mahindra, Maruti Udyog, TELCO and TVS Suzuki.
Rediff-Dun & Bradstreet Budget Impact Analysis
Budget 2001
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