Automobile industry expectation from FM Arun Jaitley: Budget 2017

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Shivan Chanana, New Delhi, January 27, 2017 | Posted by Pratik Rakshit

The Indian automotive sector saw a major slump in sales towards the tail-end of 2016. December in particular saw a drop in automobile sales by nearly 19 per cent – this is the steepest fall in sales in the last 16 years. A 16 year low in automobile sales figures and all fingers point towards demonetization. The impact it had on consumer sentiment drastically impacted sales.

Data released by the Society of Indian Automobile Manufacturers (SIAM) shows that sales of two-wheelers which comprise of 75 per cent of total vehicle sales slid 22 per cent in December 2016 compared to the figure in December 2015, marking the highest monthly contraction in the last 20 years.

While passenger vehicle sales for December 2016 slipped by 1.4 per cent over December 2015, three-wheeler sales fell the most by 36.23 per cent from 46,894 units in December 2015 to 29,904 units in Dec 2016. The total commercial vehicle sales, too, declined by 5.1 per cent in December 2016. Overall, vehicle sales slipped by 19 per cent from 15.02 lakh units in December 2015 to 12.21 lakh units last month.

The figures are definitely concerning for anyone in the automotive sector and auto industry officials are surely expecting some major announcements to enhance consumer sentiment from the upcoming budget in order to recover from the demonetization punch.

“We sincerely hope taxes are not imposed heavily on the premium car segment. We expect the budget to be less imposing on the leisure vehicles and one which enhances consumer sentiment. We also hope for a critical thinking on environmental pollution and a plan to promote environmentally friendly vehicles,” said Tom Von Bonsdorff, Managing Director, Volvo Auto India.

Sr. Vice President Marketing, Jnaneswar Sen said, “Demonetization has affected the automobile sector geographically in certain parts more than others. If you look at the cascading effect of excise duties, VAT, road tax…the amount is huge. Would be nice to have a more reasonable tax structure from the upcoming budget.”

Anurag Mehrotra, Exec Director Ford India, Marketing, Sales and Service said, “We believe the impact of demonetization would continue into the entire quarter one of 2017 if not beyond. Therefore the early implementations of reforms like GST which will lead to administrative ease of doing business are the need of the hour at the earliest.”

Well, some automobile firms are looking forward to the GST but unequivocally they all expect the upcoming Union budget to offer tax concessions and reforms which could spur consumer sentiment and demand. Let’s wait and find out what the Finance Minister Arun Jaitley pulls out of his budget hat.

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