Infra spend in Budget will create jobs, boost auto ind: Mercedes

This Budget, automakers will be keenly watching out for policies and provisions that will rev up demand in the auto sector.

In CNBC-TV18's special Budget Hangout series, Farah Bookwala-Vhora caught up with the CEO and MD of Mercedes-Benz India, Roland S Folger, who explained how higher infrastructure spending and tax incentives would help in boosting such demand.

Below is the transcript of the interview on CNBC-TV18. Q: A couple of days to go for this year's make or break Budget. What are your key expectations from this year's Budget, your top 3 expectations? A: From what we have heard so far is there is going to be some investment into infrastructure. However in addition to that all of those investments that go into infrastructure will hopefully also create additional jobs.  Q: Are you expecting the government to issue any reforms on the taxes front? A: With Make in India logic anything that brings down taxes which we would pass on then to customers would increase our volume, would basically make us interested in investing more into the country. Q: You were at the Make in India programme and at this Make in India summit you announced that you would be investing Rs 2000 crore to increase the production capacity at this very plant from 20000 to 80000 units, that is four times what you are currently producing and that is in fact double the volumes of the entire luxury car market put together in India. What is the larger plan out here? A: If you look at overall potential at the moment the luxury segment is at 1.3 percent, if that goes to 5 percent about 4 times by the year 2027 then we need to be ready for that growth. Q: Is there a larger play to export out of this plant now? A: At the moment we don't have any plans to export. However that has got nothing to do with the Make in India campaign or anything else, it has a lot to do with free trade agreement (FTA). So, for us to export to other countries you need to see the situation we are in at the moment. We are producing at the level of roughly 15000 units. That means if you compare it to our plant in Germany which is producing 1,50,000-5,00,000 units we have a significant disadvantage in size. Meaning the same vehicle produced here in comparison to produced in Germany here it will be much more expensive. It doesn't make a whole lot of sense to export those vehicles. Q: Also when you see the entire chain of events that are taking place in the automotive sector right now, one is that India is moving towards corporate annual fuel efficiency norms. At the same time we are seeing diesel ban being implemented in Delhi and now we are also seeing the possible likelihood of that being extended to other cities. Should the government in this year's Budget improve the allocation under the same policy, would this present itself as a good opportunity for a company like Mercedes Benz to start looking at hybrid vehicles? A: Technological advanced step to the next level of hybrid vehicles would require us to go to BS-VI at an early stage. We are ready for that. We have indicated that. It would be extremely helpful if the government could look into supporting financially by lowering the taxes on vehicles that achieve these BS-VI levels at an earlier date than 2020. On the diesel issue my personal feeling is let us be careful -- let us not move everything to petrol because we have the carbon dioxide (CO2) targets also that we need to fulfil and we can achieve them much easier than petrol and more sustainable with diesel engine.  (Copy edited by Nazim Khan. Interview transcribed by Swapnil Deshpande)