In what is the last Union budget to be presented before the 2024 general elections, Finance Minister Nirmala Sitharaman made some key announcements that, among other things, benefit the car consumer and the automotive industry in general.
The overarching message for the automotive industry in particular was that policies will continue to favour local manufacturing, particularly of EVs, while also pushing for green hydrogen with an outlay of Rs 19,700 crores. While there may not have been much for manufacturers in this budget, particularly from an EV policy extension POV (Re: FAME II subsidy extension) there are a few positive takeaways for the car and two-wheeler buyer, particularly at the budget end. Here’s what you need to know, if you’re in the market for a new car or two-wheeler.
Marginal increase in disposable income
With taxable income brackets being revised, individuals formerly paying tax on annual income above Rs 5 lakh, will now be exempt from doing so, as the slab has been revised to Rs 7 lakh. The increase in disposable income will likely give a boost to the ailing entry-car market which has witnessed shrinkage in the last year due to rising costs. More than entry-level cars, the move is expected to boost sales of two-wheelers.
This isn’t the case for luxury car buyers, as import duty on luxury cars and luxury EVs will go up from 60 per cent to 70 per cent, making CBU imports more expensive for cars costing less than $40,000 (INR 32.77 lakh). At the moment, the Mercedes-Benz EQS and the Volvo XC40 Recharge are the only locally assembled luxury EVs in the market (both sitting on opposing ends of the price spectrum). For brands like Audi, BMW, Merc and other players operating in the luxury EV market, importing cars already commands a 100 per cent import duty considering the price bracket within which they operate. So it’s safe to assume that those operations continue to remain unaffected. However, this will deter brands like Tesla and perhaps other international EV startups from testing the waters in India. Tesla, in the past had asked for duty concessions, having decided to abstain from entering the Indian market, after being denied said concessions.
EV silver lining
Rebates for EVs come in the form of a reduction in custom duty on capital goods for materials and machinery imported for the local manufacturing of lithium-ion batteries. Once again, this has been done to promote local assembly and manufacturing of electric vehicles. This means that lithium batteries are going to get cheaper, which would thereby increase price parity between EVs and ICE counterparts, as long as those EVs are locally-assembled. At present India imports 100 per cent of its lithium-ion battery cells, with the existing concession in duty of imported battery cells having been extended by another year.
Potential price cuts
Although the recent price hikes for cars don’t seem to have affected demand, there is good news in the revision of custom duty rates on goods other than agriculture and textiles from 21 per cent to 13 per cent. According to Finance Minister Nirmala Sitharaman, this would mean a reduction in surcharges (among other things) which could result in minor price cuts, which, once again would be noteworthy only for the budget end of 4-wheelers and the two-wheeler segment especially since commodity costs have come down in the last few months.
No country for PHEVs
Those expecting revision in the GST brackets of plug-in hybrids continues to remain disappointed as no such rebate was offered. Which means that plug-in hybrid vehicle, which features a larger battery than self-charging or strong hybrids will continue to remain absent from the line-up of all manufacturers, including the likes of MG Motors which showcased a few production versions at the recently concluded auto expo.
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