Automotive industry

Here’s what India’s auto industry is waiting for

As the 2020-21 financial year draws to a close, the Indian Ministry of Finance is set to announce the Union budget for the financial year 2023. Finance Minister Nirmala Sitharaman will announce the budget in parliament on 1 February 2022, and like all other industries, the automotive sector is also eagerly waiting to see what lies ahead. From production-related incentives for electric vehicles to the implementation of FAME II and state policies for electric vehicles to the introduction of the vehicle scrappage policy, we have seen several major developments in 2021. However, the industry believes that major reforms are needed to help bring the automotive sector as well as the economy back on the path to growth. These include changes to the PLI scheme, more incentives on electric vehicles, export concessions and more,

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The Federation of Automobile Dealers Associations (FADA), the apex body of Indian auto retailers, split its recommendation into two aspects: the call for reviving demand and dealer issues. The FADA has called for the reintroduction of the depreciation scheme, thereby increasing the depreciation rate for all types of vehicles, which could help revive growth. FADA also asked the ministry to regulate and reduce GST rates on two-wheelers to 18% from the current 28% GST + 2% cess. FADA says the current rates are correct for luxury/sin goods but not valid for the two-wheeler category.

FADA has called for the reintroduction of the depreciation scheme, thereby increasing the depreciation rate for all types of vehicles, which could help revive growth

With respect to the used vehicle industry, they requested a flat GST rate of 5% on the margin for all used vehicles, from the current GST of 12% on vehicles under 4 meters and 18% on vehicles over 4 meters. metre. FADA says this will help the industry move from the unorganized to the organized segment, helping to curb tax leakage. The government has reduced corporation tax to 25% for limited liability companies with a turnover of up to ₹400 crore. According to the FADA, “The same benefit should also be extended to all LLPs, Owners and Partnerships, as most traders in the auto dealership community fall into this category. This will help boost traders’ morale and sentiment. .”

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On the other hand, the Society of Manufacturers of Electric Vehicles (SMEV) said, “The central government has announced several support measures to promote electric mobility in the country. The industry has experienced accelerated growth in recent years. much remains to be done to make the country’s automobiles fully electric. The top electric vehicle makers body said the government may consider placing electric vehicles in the priority lending sector to make electric vehicles more affordable and include the “clean air campaign” in Swatch Bharat, to create massive awareness of electric mobility and influence customer attitudes. It also provides special allocations in the budget for R&D in battery manufacturing and skills development as well as export concessions for electric vehicles made in India.

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The Society Of Manufacturers Of Electric Vehicles says the government could consider placing electric vehicles in the priority lending sector to make electric vehicles more affordable

Regarding the government’s PLI program for automotive and automotive components, SMEV expects to see changes in the program that will allow small and medium sized EV players to participate, which is not currently possible in because of their size, turnover and track record. A level playing field will encourage more start-ups to take advantage of this opportunity and thus expand the EV ecosystem in India. “A small budget could be allocated for a points-based green card for all electric vehicle owners, such as airline types of mileage cards, which can be used in various establishments and occasions to access expedited services or acquire points for rewards,” SMEV added.

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Changes to the PLI program that will allow small and medium EV players to participate are also expected from the new budget.

Toyota Kirloskar Motor has similar expectations of the EU budget. The company’s spokesperson said: “We believe that by emphasizing the Production Linked Incentive Program (PLI) for several identified key sectors, the government has sought to transform the Indian economy into a attracting huge investments in advanced and future technologies, and for areas where India currently heavily dependent on imports.This initiative promises to not only make us self-sufficient but also globally competitive.As the huge allocation will be spread over the next five years, these programs will provide the desired impetus without the immediate and sudden burden on the treasury, and since the LIPs are also intended to provide impetus for a greener future, they will further contribute to achieving the government targets for rapidly reducing carbon emissions.”


Martin Schwenk, Managing Director and CEO of Mercedes-Benz India, says an overhaul of the existing tax structure, promotion of exports, creation of direct jobs and promotion of digitalization are highly desired

On the other hand, sharing his expectations for the budget, Martin Schwenk, Managing Director and CEO of Mercedes-Benz India, said, “The Union budget should aim for long-term holistic growth for the automotive industry by prioritizing job creation, infrastructure development, introduction of latest technologies and increased decarbonization efforts. With stable policies and a clear roadmap for the sector, accelerated growth can be achieved rapidly transitioning the industry into the emerging era of e-mobility, putting the Indian automotive industry on the global map, within the existing tax structure, with a clear focus on direct tax changes to boost consumption, export promotion, direct job creation and promotion of digitalization is highly desired.”

Meanwhile, Satyakam Arya, MD & CEO, Daimler India Commercial Vehicles said, “This year, the aspiration is to see a strategy that can provide much-needed new momentum and momentum to the manufacturing sector to help continue the momentum performance, some sections of the industry have shown in 2021. PLI and RODTEP are big steps in the right direction and the focus going forward should be to simplify schemes and focus on the benefits that spill over into the world. industry, in addition to the most important players. High fuel prices are affecting livelihoods, there is a substantial increase in commodity prices and the general cost of living has increased significantly. This requires a strategic solution rather than a tactic.


Magenta Managing Director and CEO Maxson Lewis said the fundamental expectation of the 2022 budget is that the charging infrastructure in the country should be activated at a faster rate.

Uday Narang, President and Founder of Omega Seiki Mobility, said: “As an integral part of the growing electric vehicle industry in India, we hope that the Union budget will include lower GST rates. on raw materials, in particular for electric vehicle players. Support for R&D and the development of indigenous technologies while lowering the GST on automotive components should be high on FM’s agenda.”

Electric vehicle charging infrastructure provider Magenta Managing Director and CEO Maxson Lewis said: “The fundamental expectation we have from Budget 2022 is that charging infrastructure in the country should be enabled at a faster pace. We hope that the FAME program will increasingly encompass the charging of electric vehicles. In terms of EV charging, we expect the budget to address the critical issue of electrifying EV charging through open access, along with associated taxes and transportation costs. “


Luxury Ride CEO and Co-Founder Sumit Garg Expects Upcoming Union Budget 2022 to Continue Promoting Digitalization of Automotive Laws

Sumit Garg, Managing Director and Co-founder of multi-brand premium used car seller Luxury Ride, said: “I hope the upcoming Union Budget 2022 will continue to promote the digitalization of automotive industry laws, which will lead to increased vehicle sales, and also promote faster transfer of ownership.To pave the way for the future, I hope our government will support cheaper taxes by providing some flexibility in the GST rate on second-hand cars.


So, the expectations are quite high and most of them have strong merits. However, what all of these will be addressed in the next budget remains to be seen. So, keep watching for all the updates of the Union Budget 2022 announcement.

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