Auto Ind sees roll back of excise duty cut: ICICIdirect.com

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According to ICICIdirect.com, roll back of excise duty cut, removal of additional specific duties of Rs 15,000/ 20,000 imposed on high fuel consuming utility vehicles (UVs) over 1500 cc and extension of accelerated depreciation for all commercial vehicles from September 30 2009 to March 31 2010 is expected for the auto sector from the budget.

Expectations

• Roll back of excise duty cut
• Extension of accelerated depreciation for all commercial vehicles from September 30 2009 to March 31 2010
• Removal of additional specific duties of Rs 15,000/ 20,000 imposed on high fuel consuming utility vehicles (UVs) over 1500 cc
• Increase in spend on road infrastructure and state transport
• Increase in import duties on certain components to protect domestic industries as well as imposition of anti dumping duty on tyres imported from China

ICICI Direct's View

• Considering the widening fiscal deficit, we expect a likely roll back of cut in excise duties to the extent of 2%. This will be negative for all automobile companies. However, companies would pass on the same to consumers through price hikes.
• Key beneficiaries would be Tata Motors, Ashok Leyland, M&M and Eicher Motors from extension of accelerated depreciation for all commercial vehicles. This would support volume growth for these companies.
• As fuel prices have declined from their peak levels there may be removal of additional specific duties on high fuel consuming vehicles.
• Any step (easy finance) to improve rural demand would augur well for companies.
• Auto ancillary and tyre companies to benefit

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