The infrastructure push in the Budget augurs well for the auto industry

The finance minister’s announcement of increased government expenditure on building road and other infrastructure will boost the demand for commercial vehicles in the short to mid-term while a larger road network will lead to more demand for cars as well as commercial vehicles in the long term, experts said.

A 5-percentage point reduction in duties on steel products to 7.5% will also help the companies offset the sharp rise in raw material prices. The Rs 18,000-crore allocation for public transport buses will help generate demand for the struggling bus segment after sales have dipped to a tenth of pre-Covid levels.

The Rs 18,000-crore allocation for public transport buses will help generate demand for the struggling bus segment after sales have dipped to a tenth of pre-Covid levels.

“Any infrastructure development leads to an increase in CV demand, always. Therefore, the kind of thrust (on infrastructure spending) that we have seen, will definitely have a big impact on CV demand,” said Pawan Goenka, managing director of  Mahindra and Mahindra.

An increase in import duty on several automotive components from 7.5-10% to 15% will, however, result in a cost increase for the industry in the short term. The impact will vary from automaker to automaker and will weigh heavy especially on luxury car manufacturers.

“The increase in customs duty on certain auto parts to 15% will further increase input costs and prices for cars which depend on specialised components which cannot be manufactured locally due to unviable volumes,” said Gurpratap Boparai, managing director, Škoda Auto Volkswagen India.

But in the long term, this will help develop local manufacturing capability for these components. A hike in customs duty on import couple with the Rs 57,000-crore production-linked incentive scheme (PLI) will encourage self-reliance of the domestic automo ..

Read more at:
https://economictimes.indiatimes.com/industry/auto/auto-news/the-infrastructure-push-in-the-budget-augurs-well-for-the-auto-industry/articleshow/80634856.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppstGurpratap Boparai, managing director, Škoda Auto Volkswagen India.

But in the long term, this will help develop local manufacturing capability for these components. A hike in customs duty on import couple with the Rs 57,000-crore production-linked incentive scheme (PLI) will encourage self-reliance of the domestic automotive industry.

“The auto industry has limited direct gains from the Union Budget 2021-22, albeit indirect gains from infrastructure spends could lend support. Commercial vehicle demand will receive support from construction-led infrastructure push in sectors like roads, urban infra- received in this budget,” said Hetal Gandhi, Director, CRISIL Research. “However, the much anticipated scrappage policy to remain a non-event given voluntary nature of implementation without incentives.”

 
Date : Feb 01, 2021
Source : https://economictimes.indiatimes.com/industry/auto/auto-news/the-infrastructure-push-in-the-budget-augurs-well-for-the-auto-industry/articleshow/80634856.cms

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