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February 25, 2001                                       Feedback  

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Run up to the Budget: Automobiles sector

The automobile sector is broadly divided into passenger cars, two wheelers and commercial vehicles

Tax Structure

Customs Duty* (%)

Item

1999-2000

2000-2001

Two Wheelers

40

35

Motor Vehicle

40

35

Commercial Vehicle

40

35

Tractors

40

35

*Basic

Excise Duty (%)

Item

1999-2000

2000-2001

Two Wheelers (<75cc)

16

16

Two Wheelers (>75cc)

24

24

Motor Vehicle
(Up to 6 seater plus driver)

40

40

Motor Vehicle
(7 to 12 seater plus driver)

30

32

Motor Vehicle
(13 seater and above)

16

16

Commercial Vehicles
(other than petrol driven)

16

16

Tractors (<1800cc)

8

16

Tractors (> 1800cc

16

16

 

Background

  • It has been a year of gloom for the automobile sector with a significant downturn witnessed during FY 2000-01 in all segments except for motorcycles and Light Commercial Vehicles (LCV).

  • During Apr-Dec 00, sales of cars (including Multi-Utility Vehicles) fell by 6.3%. Sales of Heavy Commercial Vehicles (HCVs) fell by 23% and that of tractors fell by 7.6%. However, car sales experienced a 7% growth in Jan 01.

  • The two wheelers industry has recorded a marginal 3.4% growth in sales mainly due to buoyant trends witnessed in the motorcycle segment. There has been a substantial decline in the scooter segment in this fiscal year.

  • The Quantitative Restrictions (QRs) on automobile sector will be lifted from 01/04/01. Cheap imports from China and Europe are expected to further add to the woes of Indian automobile manufacturers. Imports of used vehicles will pose huge challenge to the domestic industry. Future course of events would be largely determined by the degree of duty protection that the Finance Minister offers to the passenger car segment in this budget.

Previous budget (FY 2000-01) announcements

  • Excise duty remained at 40% for cars. For Multi-Utility Vehicles the excise duty was increased from 30% to 32%.
  • Customs duty for cars was reduced from 40% to 35%.

Pre-budget Industry Wish list

  • Confederation of Indian Industry (CII) has recommended that for cars up to a carrying capacity of 6 persons, excise duty should be reduced from the present level of 40% to 32%
  • As a protective measure in the wake of new WTO regime, the industry has demanded imposition of customs duty of 70% instead of the present 35% on Completely Built Units (CBU)/Semi Knocked Down (SKD) units of new vehicles.

  • Manufacturers of below 30HP tractors have demanded a reduction in excise duty to the earlier level of 8% from which it was increased to 16% in the previous budget.

  • Auto Component Manufacturers Association (ACMA) has sought a level playing field by removal of inverted customs structure of auto components. Presently, raw material for auto component manufacture is maintained at peak rate while the imported components are not charged at the peak rate.

Expectations from the Budget

No rationalisation measures are expected.

Key Players

Ashok Leyland, Bajaj Auto, Bajaj Tempo, Daewoo Motors, Eicher Motors, Escorts Yamaha Motors, Fiat India, Ford India, General Motors India, Hero Honda Motors, Honda Siel Cars, Hindustan Motors, Hyundai Motors India, Kinetic Motor, LML, Mahindra & Mahindra, Maruti Udyog, TELCO and TVS Suzuki.

Rediff-Dun & Bradstreet Budget Impact Analysis
Budget 2001

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