Cars Unlikely to be Cheaper Post-Budget

Ahead of the Budget, the auto lobby or the Society of Indian Auto Manufacturers (Siam) has again resurrected its demand of lower excise duty. The Heavy Industries and Public Enterprises Ministry has also pitched for the restoration of lower excise duty benefits to the automobile industry.

But analysts say Finance Minister Arun Jaitley is unlikely to give in to the demands of the auto industry considering the rising demand for automobiles.

Excise duty on small cars, scooters, motorcycles and commercial vehicles was reduced to 8 per cent from 12 per cent in the interim Budget announced in February 2014. For SUVs, excise duty was cut to 24 per cent from 30 per cent; for mid-sized cars, to 20 per cent from 24 per cent, and to 24 per cent for large cars from 27 per cent.

The new government led by Prime Minister Narendra Modi decided to extend excise duty concessions by six months in June 2014; the duty relaxation was finally withdrawn on December 31, 2014.

In the first nine months of fiscal year 2014-15, automotive volumes have grown by 9 per cent year-on-year, Angel Broking said. Two-wheelers have seen the fastest growth, reporting an 11 per cent Y-o-Y growth, followed by passenger cars which grew by 3 per cent, it added.

"We expect status quo to be maintained on this front (excise duty)," the domestic brokerage added.

Analysts say the auto industry is poised for higher sales as economic growth rebounds and domestic petrol and diesel prices continue to fall tracking the slump in global crude prices. Interest rates are also likely to trend lower making EMIs more affordable.

"We expect the industry's growth to accelerate over the next two years given the better economic outlook, downtrend in fuel prices and reduction in interest rates," Angel Broking said.

Analysts say the government's focus on the infrastructure sector will also help the auto industry indirectly.