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Budget 2018
Last Updated : Jan 17, 2018 04:30 PM IST | Source: Moneycontrol.com

Budget 2018: Commercial vehicles geared for growth

Crisil Research expects reduction in cess for hybrid vehicles to zero.

Crisil Research

After a strong growth of around ~20% in fiscal 2018, we expect LCVs to grow by around 10-12% in fiscal 2019, aided by higher replacement demand and improvement in private consumption.

MHCVs are expected to grow at a moderate pace of 5-7% in fiscal 2019 after a robust growth of more than 10% likely this fiscal.

▪ Replacement demand for MHCVs is expected to decline in fiscal 2019, efficiencies due to GST and a shift towards higher tonnage vehicles will further moderate volume growth.

▪ Buses, which de-grew in the current fiscal, are expected to bounce back in fiscal 2019 to clock ~10% growth.

▪ The overall CV industry is expected to grow by around 10% in fiscal 2019.

Increasing affordability, popular models to fuel passenger vehicle sales

▪ Higher economic growth, state pay commission payouts, lower financing costs, improving infrastructure, and continued traction for popular models are expected to script robust growth of 9-11% for the passenger vehicle industry in fiscal 2019.

The fiscal will also see the end of GST teething problems and volume contributions by the trading community, further aiding growth.

▪ The utility vehicle segment is also expected to clock strong growth in fiscal 2019 due to continued traction for popular models.

Improved rural demand and Pay Commission payouts to boost two-wheelers

▪ Two-wheeler sales are expected remain positive in fiscal 2019, supported by improved affordability due to better monsoons, pay commission payouts, and continued high demand for scooters.

▪ A normal rabi sowing and increase in minimum support prices (MSPs) by 6-11% for the rabi crop are further expected to boost rural demand.

Combined braking system (CBS) installations are expected to hike prices by Rs 500 -1000 for scooter models which currently lack them. However, we expect this to have a negligible impact on scooter sales as most scooter models already have CBS installed.

▪ Motorcycles sales are expected to grow by 9-11% in fiscal 2019, assuming a normal monsoon, strong rural sentiment and a pickup in rural infrastructure. Mandatory ABS/CBS mandatory from April 2019 is expected to hike prices by Rs 500 -1000 for economy and executive motorcycles, and ~Rs 9,000 for premium motorcycles. However, while we expect this to have a negligible impact on economy/executive segment motorcycle sales, the premium segment does stands to be impacted.

▪ Overall, we expect the two-wheeler industry to grow by 8-10% in fiscal 2019, on the back of a normal monsoon, improved rural demand and a pickup in infrastructure activities.
Key expectations from the budget

1. Reduction in cess for hybrid vehicles to zero.

Not only will this help original equipment manufacturers (OEMs) produce environment friendly vehicles, but also aid in the improvement of fuel efficiency, thereby reducing crude oil requirement. This, in turn, will further help reduce imports and support the current account deficit.

2. Reduction in GST on public transportation vehicles like buses.

In addition to safety concerns, STUs have ageing fleet which contributes significantly to environmental pollution. Reduction in GST on STU purchases will aid in the replacement of older vehicles by fuel efficient vehicles, in compliance with the latest safety norms and amenities. This will also reduce the vehicle intensity on the roads as more people will prefer using public transport.

3. Fund allocation for vehicle fleet modernisation plan to replace old polluting vehicles on Indian roads.

4. Zero GST on electric vehicles (EVs) used for public transportation, like buses, three-wheelers and taxis.

5. A mechanism by which transporters can set off GST on goods transportation with the input credit for tax paid on fuel expenses

Crisil_Final

India Union Budget 2018: What does Finance Minister Arun Jaitley have up his sleeve? Click here for live Budget 2018 news, views and analyses.
First Published on Jan 17, 2018 04:20 pm
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