Union Budget 2011 Impact on Indian Automobile Sector

Automobile Sector:
 
Budget Proposals

* No change made in the central excise duty.
* Rates kept unchanged at 10 per cent
* Special incentives have been announced for companies manufacturing hybrid vehicles in India
 
Budget Impact

The impact of the budget 2011-12 on the automobile sector can be explained in just a few words - no news is good news. It is quite simple; the automobile sector usually attracts more attention ahead of the budget as changes in the excise duty make a huge impact on the pricing. This time everyone expected a hike in excise duty from 10 per cent to 12 per cent mainly on account of an expected rollback of the stimulus packages announced by the government earlier. With the economy getting back to pre-crisis growth levels everyone expected this roll back. But the finance minister did not touch the excise duty structure at all .
 
There are some announcements in the automobile sector but these are related to hybrid cars as special incentives have been announced for companies manufacturing hybrid vehicles in India. Full exemption from basic custom duty and SAD and a concessional CVD is being extended to specified parts of hybrid vehicles like battery packs, battery chargers and motor controllers. So, electrical vehicle manufacturers will benefit. The only notable listed company in electric two wheelers is Electrotherm India.
 
Moreover, broader measures like increased focus on rural and infrastructure spending would support long term growth of the sector. The focus on agricultural growth is expected to drive the growth for tractors and farm equipments. Rural areas are important markets for the Indian automobile Industry. Going ahead, the focus on the rural economy is expected to drive growth for automobiles. Moreover better road infrastructure is expected to drive growth for commercial vehicles. Overall the budget seems to have a positive impact on the automobile sector.