Budget 2024: Auto industry expects continued capex, thrust on rural economy, FAME 3 subsidy among others

FM to present Modi 3.0 government's maiden annual budget

Ahead of Budget 2024-25, the domestic automobile industry is hoping for some big-bang reforms that will drive growth, innovation and sustainability. While all stakeholders hope the government retains its focus on capital expenditure (capex) with special emphasis on infrastructure development, most of them are also counting on the announcement of third phase of the FAME3 electric vehicle (EV) subsidy policy.

SIAM or the Society of Indian Automobile Manufacturers believes that the government will continue with infrastructure spending because of its “multiplier effect” on the country’s GDP and the overall economy.

The auto industry has also sought measures to promote the wider adoption of EVs and suggested that the government should bring in additional incentives in the budget for scrapping vehicles that have crossed a certain age.

“We are expecting that it will be a growth-oriented budget, which means that there will be more focus on the capital expenditure, which has a multiplier impact on all sectors of the economic growth. If the economy continues to grow, the auto industry will continue to drive this growth,” said SIAM president Vinod Aggarwal.

During the interim budget, finance minister Nirmala Sitharaman had raised the outlay on infrastructure capex by 11.1 percent from Rs 10 lakh crore to Rs 11.11 lakh crore, amounting to 3.4 percent of GDP.

Aggarwal also pointed out that the rural economy is witnessing an uptick with good prospects of monsoon rainfall. In his view, “If the government is going to come out with some incentives for the rural economy, it will be good for the automotive industry and the overall economy.”

On similar lines, auto component industry body ACMA has suggested incentivising capex within the industry by reintroducing additional investment allowance provision, increasing depreciation rates on plant and machinery from 15 percent to 25 percent and rationalising goods and services tax rates on EVs and its components.

Shradha Suri Marwah, the ACMA president ACMA and chairman and managing director, Subros Ltd, said, “ACMA is looking forward to a growth-oriented budget with continued thrust on reforms and infrastructure development. Schemes such as the PLI (production-linked incentive scheme) have been of great support to the automotive industry, and we are hopeful that such measures will be continued.”

Mercedes-Benz India, the local arm of the manufacturer of luxury cars, expects the capex outlay to rise. As its managing director Santosh Iyer put it, “That should be the basic expectation so that there's a lot to be done when it comes to intercity connectivity and that thrust continues from the government.”

He also opined that the government can give a clear statement of intent when it comes to tax rates on EVs in the long term. “I think that gives a lot of confidence in EV adoption. I think a lot of innovation and new policies or incentives can be given for faster adoption of EVs,” maintained Iyer.

The Federation of Automobile Dealers Associations (FADA) has also sought some measures in the upcoming budget to stimulate the industry and broader economy.

It has urged the finance minister to introduce the benefits of claiming depreciation on vehicles for individuals paying income tax. “Allowing individuals to account for depreciation will not only increase the number of income tax filers but also ignite automobile demand,” said Manish Raj Singhania, the FADA president.

FADA has also urged the government to reduce corporate tax for limited liability partnership, proprietary and partnership firms as most traders within the auto dealership community fall into these categories.