Interim Budget 2024: Auto industry seeks policy consistency, focus on EV

Special focus on MSMEs, new startups and inclusivity will align with the prime minister's vision, Sitharaman added.

As the interim budget draws close, automobile industry stakeholders have varied expectations of the Finance Minister, Nirmala Sitharaman.  While none  expect big bang reforms from this vote-on-account budget, most believe that some measures that would further boost the economic growth of the country could be announced.

The industry believes that focus on last-mile connectivity, infrastructure, and policy consistency would propel sectoral expansion.

The Society of Indian Automobile Manufacturers (SIAM) believes that though sector-specific announcements are unlikely to be made, it is hoping that there is no “drastic change” in the existing policies, which can disrupt the ecosystem.

“The government is doing an extremely good job with the allocation of capital expenditure and infrastructure investments, which were very high during the last fiscal. We are glad that the execution of those projects is going very well. Therefore, our expectation from this budget is that such initiatives should continue,” Vinod Aggarwal, President, SIAM, told Moneycontrol.

Seconding Aggarwal’s thoughts, Shashank Srivastava, Senior Executive Director, Maruti Suzuki, said that the auto industry’s performance has a “close correlation” with the country’s overall  economic growth.

``We look forward to continuity of policies supporting growth, especially continued capital expenditure and  infrastructure spending. Hopefully, support to the manufacturing sector will be further strengthened,” added Srivastava.

Santosh Iyer, Managing Director and CEO, Mercedes-Benz India, feels the luxury car industry makes a significant contribution to the GDP, and seeks a rationalised duty structure.

Industry players, especially those betting big on battery-run vehicles, also expect sustained support for greener technologies, especially electric vehicles (EVs).

The automotive industry is seeking an update on potential FAME 3 schemes (incentivising EV production), reduction in GST on lithium-ion batteries, production-linked incentives (PLIs), and lowering the GST  on entry-level ICE (internal combustion engine) two-wheelers, which currently stands at 18 percent.

The reduction in customs duty on EV parts in the previous budget spurred local manufacturing,  and similar amendments are desired by industry players in thе 2024 budgеt. Looking bеyond financial allocations, some manufacturers hope that the interim budgеt will unveil a comprеhеnsivе policy framеwork for EVs, addrеssing licеnsing, safеty standards, and insurancе norms. Some carmakers, especially Japanese ones, reckon that hybrid vehicles will be included in the FAME III incentive scheme.

The Automotive Component Manufacturers’ Association (ACMA), the apex body for the auto component industry, said that it lauds the government for its “benign policies,” especially the PLI and FAME, which have greatly benefitted the automotive ecosystem.

“We are hopeful that these will continue to receive generous budgetary allocations. There are a few instances  of inverted duty structure with regard to GST in case of EVs and some components, which are being taken up with the GST council,’’ said Vinnie Mehta, Director General, ACMA.

Hari Kiran, Co-Founder and COO, eBikeGo, a manufacturer of ebikes, believes that a uniform 5 percent GST on all EV sparеs, which is alignеd with thе 5 percent GST on vеhiclеs, will rеsonatе with thе industry as it aims for a morе еquitablе tax structurе.

In his view, “To fostеr cost rеduction, a focus on localising battеry manufacturing is crucial, with incеntivеs for battеry manufacturing units and a robust supply chain for EV componеnts.”

Naveen Munjal, Founder and Managing Director, Hero Electric, feels the upcoming union budget presents a crucial opportunity to accelerate India's transition to electric mobility.