Following is Antique’s view on the implications of the Budget for the auto sector:
Prima facie we could not find anything specific and tangible for automobile sector in the Union Budget 2015-16, though there were few aspects that one can ponder upon to gauge its longer run impact.
Lower excise duty, speeding up the implementation of Goods & Service
Tax, scrappage incentive on old vehicles, implementation of anti-dumping duty on imported tyres from China, etc were the primary expectations from the industry players to spruce up demand.
Barring the assurance of speeding up GST's implementation, most demands were not addressed in the current budget. Gradual reduction in corporate tax to 25% from 30% across years, at the cost of gradual removal of various tax incentives for corporate India, will bring all companies on an equal tax footing, which was the most significant aspect in this Budget.
In terms of indirect benefits, the government's focus on infrastructure will indirectly help the industry in the longer run. Also, higher disposable income on the back of increased modes and quantum of tax saving would be a driver for personal mobility segments like two wheelers and low-priced passenger cars.
Thrust on manufacturing revival in micro, small, and medium enterprises (MSMEs) and the government's focus on reviving the agriculture segment would push job creation and have a positive impact on personal mobility segments. In terms of vehicle manufacturing cost, a minor negative impact would be felt on the back of higher import duty on iron and steel to 15% from 10% earlier.
Our top picks under coverage are:
Maruti Suzuki India, Tata Motors, Bharat Forge, Ashok Leyland, and Eicher Motors.
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