Auto industry hit by lower capex allocation, Tata Motors and Ashok Leyland decline

The industry has also been looking for friendlier taxation of EV components and hybrid vehicles.

The commercial vehicle industry faced a setback as Finance Minister Nirmala Sitharaman trimmed the capex allocation for FY25 to Rs 10.18 lakh crore from Rs 11.11 lakh crore, dashing hopes of a much-needed boost for the struggling segment.

As a result, commercial vehicle majors such as Ashok Leyland fell over 2 percent and Tata Motors slipped nearly 2 percent, continuing its dismal run since declaring its third quarter earlier this week.

According to analysts, the government's capex push had a direct bearing on the sales of commercial vehicles and ancillary industries. In the last Budget, the capex allocation was Rs 11.11 lakh crore, which was very heartening for the industry. But, during the year, the pace of national highway construction slackening and the central government's focus on election-related activities hurt the industry, according to market experts.

There were industry-specific asks like the rationalisation of taxes across EV components and infrastructure. While GST on EVs is a reasonable 5 percent, the components are still taxed at 15 to 28 percent. As insiders told Moneycontrol in pre-Budget conversations, a reduction in GST rates for EV batteries could bring down vehicle costs even by 40-50 percent.

The government did somewhat deliver on that. The Finance Minister announced a slew of initiatives to build an ecosystem for solar PV Cells & EV Batteries. Investors cheered the announcements, driving gains across key auto stocks.

Industry stakeholders also wanted the government to promote the production of hybrid vehicles as a transitional technology with better GST rates. Currently, they are taxed at 28 percent, while the industry players wanted them taxed at 18 percent.

At about 3 pm, two-wheeler majors such as Hero MotoCorp, Bajaj Auto, TVS Motor, and Ola Electric gained up to six percent from the last close on the NSE. On the other hand, four-wheeler names -- Maruti Suzuki, M&M, and Hyundai Motor India jumped to up to 5 percent.

At about 3 pm, Nifty Auto was trading at 23,336, higher by 1.6 percent from the last close. The index has shed nearly 15 percent in the last six months.