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Analysts forecast 35 percent growth for MHCVs supported by a 14 percent rise in capital outlay in Budget 2023

Autocar Professional Bureau — Mon, 06 Feb 2023 08:56:06

In its assessment of the impact on the medium and heavy commercial vehicle (MHCV) sector from Budget 2023, rating firm CRISIL has said that sales in the sector are expected to rise 35-37 percent year-on-year this fiscal, on a low base, supported by a healthy 14 percent rise in capital outlay in the budget. “Next fiscal, with capital outlay rising 28 percent, multi-axle vehicles, tractor-trailers and tipper trucks will benefit,” the ratings agency report has said.

Vinod Aggarwal, President, SIAM and MD and CEO, VECV sharing his reaction on the Union Budget said, “The announcement of funding various government departments for replacement of old vehicles is also commended and a 33 percent increase in capital outlay with an effective provision of Rs 13.7 lakh crores will spur growth in the economy resulting in a positive impact on the Auto sector.”

In a report, IIFL Securities has said that in Jan 2023, the MHCV industry grew 26 percent year-on-year. The sector’s seasonally adjusted annual rate (SAAR) , which is around 350 thousand, is expected to increase by 45 percent based on the current estimates and business outlook.

According to a notification by the Road Transport and Highway Ministry, nine lakh government vehicles, which accounts for six percent of CV and passenger vehicles (PV) consolidated sales considering a three-year sales spread, comprising PVs that are older than 15 years, will be scrapped from April 1, 2023. This will lead to incremental demand for cars during the envisaged policy period, and is likely to drive up EV adoption, analysts at Crisil Research have indicated.

Government's Rail Push and Higher CPSe spending will help MHCV sector
The Union Budget has also upped the spending of Central Public Sector Units (CPSEs) to 6.2 percent of GDP in fiscal 2024 from 5.4 percent on average during the pre-Covid-19 decade. With a 25 percent jump at 2.6 lakh crore which is one of the highest budgetary allocations directed towards major infrastructure-related sectors such as roads and a 50 percent jump in spending of 2.5 lakh crore for railways MCHV sector which supports the movement of goods and freight will see a sharp recovery.

GOI's Rail push will also spur component manufacturing opportunities for the Indian Railways, said e-bus maker Pinnacle Industries & EKA Mobility, Founder and Chairman, Sudhir Mehta. “The government’s rail push will trigger new opportunities and growth in railway component manufacturing, maintenance and operations systems,” he said.

Mehta who is also the Immediate Past President of Mahratta Chamber of Commerce, Industries, and Agriculture – MCCIA said, “The focus on capital expenditure with promising prospects for the commercial vehicle, green mobility, and railway sector is indeed encouraging.”

Allocation of Rs 300 crores provision for hydrogen infrastructure in Budget 2023 not enough say industry experts

Autocar Professional Bureau — Sun, 05 Feb 2023 21:55:38

Of the total commitment of Rs 19,700 crore for the National Green Hydrogen Mission, Rs 300 crore has been allocated for hydrogen infrastructure in Budget 2023. Industry experts, including those from rating agency CRISIL, are saying that this amount is not enough to launch hydrogen vehicle models in the near future.

Analysts tracking the sector are of the opinion that the squeeze in fund availability will directly delay infrastructure creation for transportation and storage of green hydrogen and limit OEMs bandwidth to launch H2 models before 2030. This opinion is part of a report by CRISIL assessing the Union Budget 2023.

Rajendra Petkar, Chief Technology Officer and President of ARAI at a recent event in Pune had said that creating the necessary infrastructure for hydrogen cannot be the task of a single OEM, but as it involves substantial investments from government and industry participants ‘a collaborative approach is required’.

“Typically, if the government puts in more money for infrastructure development and scales up the infrastructure, it sends a strong signal to the automakers to start their production for that specific fuel. This we have seen in CNG where the entire fleet of three-wheelers passenger vehicles and even commercial vehicles which have shifted to a greener fuel, once the availability has improved,” said the CTO of another leading automaker.

CRISIL in its assessment says that till such time most of the hydrogen produced is expected to replace grey hydrogen which will find its application in the fertilisers and agriculture sector.

Another side of the same development is that the government has increased capital allocation for the Ministry of New and Renewable Energy to Rs 47,591 crore in the fiscal year 2024 from Rs 34,490 in FY23.

Analysts add that such higher allocation will speed up the transition to clean fuels, but whether such funds will get diverted for green hydrogen is not clear at the moment.

Based on all these factors, CRISIL has revised its forecast for domestic hydrogen consumption which is expected to touch 5MT by 2030. “Our estimates suggest only 1.0-1.5 MT of green hydrogen will be domestically consumed by 2030 and the remaining will be exported, the report further adds.

SMEs, EV startups, and battery makers to get boost from Budget 2023 allocation of Rs 88,198 crore

Autocar Professional Bureau — Fri, 03 Feb 2023 14:47:48

SMEs, EV startups, and battery makers will be the largest gainers of the Rs 88,198 crore allocated for climate-related measures in the Union Budget 2023. This amount accounts for 2.0 percent of the total expenditure in fiscal year 2024, compared with 0.9 percent in fiscal year 2023.

These sectors' growth engines are set for a huge boost in the green adoption space as these provisions are revenue spending linked through subsidies.

To promote a start-up culture, the government has extended the period of incorporation by one year to April 1, 2024, to be eligible for tax benefits outlined to them. Start-ups can also carry forward losses on change of shareholding from seven years to ten years of incorporation.

The infusion of the roughly Rs 9,000 crore corpus will enable additional collateral-free guaranteed credit of Rs 2 lakh crore. It will also aid in faster growth of micro, small, and medium enterprise (MSME) credit, which will allow for a one percent reduction in their cost of borrowing.

The turnover limit under presumptive taxation for micro entities has been revised to Rs 3 crore from Rs 2 crore earlier. Also, the provision for carrying forward losses on change of shareholding of startups has been extended to 10 years from the date of incorporation from seven years previously. “This is likely to reduce the taxable income by 20 percent, assuming a Rs 3 crore turnover, and improve SMEs margins by 7.5 percent,” one analyst tracking taxation and finance said.

SME EV maker Okaya Electric Vehicles Managing Director, Anshul Gupta said, “The viability gap funding announced to support the Battery Energy Storage Systems, along with a framework of Pumped Storage Projects, is designed to reduce the revenue required to recover costs and offer better returns, especially for the Private sector.”

As per CRISIL estimates, battery projects of 4 GWh that get government support through Viability Gap Funding will form 2.7 percent of the overall battery storage demand of 150 Gwh (37.5 GW) and 1.7 percent of the total storage demand of 220 Gwh (55 GW) till fiscal 2031.

“The policy on pumped storage will provide a fillip to projects of 22 GW estimated to come up till fiscal 2031, out of which nearly 7 GW of infrastructure will be set up by private players. Overall, this is a small step in the right direction for India's clean energy transition in power,” claims an analyst at CRISIL.

Barnik Maitra, the Managing Partner of Arthur D. Little India said that the biggest takeaway from Budget 2023, when central grants and state loans are taken into account, is a total of Rs 15 lakh crore of capital outlay which, at five percent of the GDP, is an unprecedented budgetary allocation in India’s history. Maitra also said this huge capex growth will also spur the growth of the SME sector, with the strategy of the government being to crowd in private investments by significant government capital allocations.

78 percent jump in FAME 2 subsidies outlay in Budget 2023 evokes mixed reactions from industry

Autocar Professional Bureau — Fri, 03 Feb 2023 10:25:55

Finance Minister Nirmala Sitharaman almost doubling FAME 2 Subsidies outlay with a 78 percent jump over FY23 allocations has evoked mixed reactions from domestic EV players.

Speaking to Autocar Professional, Sohinder Gill, Director General of industry body Society of Manufacturers of Electric Vehicles (SMEV) said, “Nothing has changed for the industry in the new allocations as it doesn't impact the overall outlay made by the government when the FAME 2 subsidy was introduced.”

FM Nirmala Sitharaman’s allocation of Rs 5,172 crore for FY24 is one of the steepest in the history of the scheme since it was introduced in 2019 with the Rs 2,898 crore allocated for FY23 being the second highest allocation. Commenting on the FAME 2 subsidy revision, Gill said, “The figure given in the current budget is a leftover budget of FY24, which was declared in 2019.

Gill is right in his assessment; the basket of FAME 2 allocation remains the same at Rs 10,000 crore when it was announced in 2019 with the government taking a step-by-step approach in its allocation over the years. In FY20 the government allocated 500 crore for FAME 2 which was revised to 318 crore in FY21. In FY22, the Government of India increased the allocation to 800 crore which was further revised to 2,897 crores in FY23 and to 5,172 crores in FY24.

Hemal Thakkar, Director of CRISIL Research, sharing his opinion on the higher outlay, said that for the last few years the Government of India has been increasing the FAME 2 subsidies outlay and this is good for the EV Industry. He added that the exemption of the plant and machinery along with the performance-linked incentive (PLI) will work hand in hand to reduce the cost of cell manufacturing and provide a “fillip to electric vehicle manufacturing with costs coming down in the long term.”

Higher allocations and unpaid subsidies put EV OEMS in a tough spot

Gill said that on the one hand, the government is showcasing higher allocations, but on the other hand, close to 1,200 crore of FAME 2 subsidies lie unpaid for around 12 manufacturers who represent 90 percent of the industry. “The delay is of six to twelve months and more than 12 OEMs who constitute 90 percent of EV volumes in FY22-23 are affected with the total pending dues that have crossed over 1200 crore,” he said.

Indian electric two-wheeler makers like Hero Electric and Okinawa are some of the largest players impacted by the subsidy challenges and have been passing on the subsidy component from their own pocket, Gill said.

A company official at India's Number Three L5 electric three-wheeler maker, Omega Seiki Mobility said that the last time the industry faced a challenge, a substantial amount of money was released by the government around July 2022. “As dues now are more than four months old pending since August, we are hopeful that the government will speed up the mechanism to ensure that industry members who are doing their business with good practices don't get penalised and cash flows don’t get impacted,” the official said.

However, representatives at the Ministry of Heavy Industry who are responsible for the dispensation of subsidies denied that there was any such delay. “There is no such delay on our end. Manufacturers are supposed to present information which is now independently validated and subsidies are given on time,” a ministry official told Autocar Professional.

EV makers welcome moves for higher allocation

Another Electric bus manufacturer and mobility solutions provider GreenCell Mobility recently bagged an order from the Transport Department, Government of NCT Delhi for 570 electric buses. The company’s COO and Director of Finance Summit Mittal said that the challenge for FAME 2 Subsidies is only with electric two and three-wheeler manufacturers and that e-bus makers as well as passenger car makers are getting the subsidies on time.

Welcoming the government’s move to almost double the FAME 2 subsidy, Mittal said, “The increased outlay for FAME 2 subsidy shows this government's commitment for Net Zero which can only be achieved through clean and green mobility. OEMs need to be further incentivised for this and it will help to reduce costs of operations for EV makers.”

The Union Budget 2023 has allocated close to Rs 88,198 crore for climate-related measures. This accounts for 2.0 percent of total expenditure in the fiscal year 2024, compared to 0.9 percent in fiscal 2023.

Samarth Kholkar, CEO and Co-Founder of multi-brand EV retail firm BLive said, “The higher allocation of the FAME 2 subsidy will promote EV sales, especially in the two-wheeler and three-wheeler segment, and also give a push to passenger EV sales. However, we were also hopeful that the FAME 2 subsidy would be extended beyond its lifecycle as only Rs 300-odd crore would be left after the current allocation. The industry will need the government's push to move towards clean mobility.”

Auto component maker Steelbird international which makes specialised tyres for EVs and is a leading aftermarket provider also said the higher budgetary provision for FAME 2 subsidies will directly push the demand for EV-specific tyres in the aftermarket as replacement demand will increase substantially. Manav Kapur, Executive Director, Steelbird International said, “The FAME 2 subsidies’ revision and measures announced for skilling and research in AI, Robotics, 5G, Mechatronics, and 3D printing will trigger quality production across the sectors and the auto components industry will also benefit from incorporating these cutting-edge technologies in various operations.”

An assessment of the Union Budget by CRISIL has said more than two-thirds of climate expenditure this fiscal is capex, which is primarily going for investment towards energy transition under the Ministry of Petroleum and Natural Gas. “Expenditure on other initiatives is primarily revenue spending in nature as they are primarily in the form of subsidies for promoting green adoption by the private sector,” the CRISIL report says.

Growth-oriented Budget to be demand accelerator for India Auto Inc

Autocar Professional Bureau — Thu, 02 Feb 2023 08:50:22

The Union Budget 2023-24, which was presented by Finance Minister Nirmala Sitharaman in the Parliament on February 1, comes out as a growth-oriented plan with emphasis on measures to stimulate demand as well as positively impact the supply chain to sustain momentum in the Indian economy.

The government maintained its focus to strengthen infrastructure development by increasing capital infusion by 33 percent to Rs 10,00,000 crore, and further allocated additional funds towards key sectors – railways and agriculture – while offering fiscal benefits to start-ups and MSMEs (micro-, medium- and small enterprises), opening new doors for them to flourish.

In a huge relief to the taxpayer, the government also increased the zero-income-tax slab from Rs 500,000 to Rs 700,000 and lowered the subsequent slabs in the ‘new’ Income Tax regime, enabling higher disposable incomes in the hands of citizens. The move has been widely applauded and labelled to bring a boost to the sentiment in the economic environment of the country.

Specifically for the automotive sector, it is being expected to bring a respite to the lower end of the vehicle industry, where sales of entry-level cars and two-wheelers have been struggling due to unaffordability of buyers at the bottom end of the pyramid.

Increased incomes as a result of direct tax cuts is expected to act as a fillip for sale of entry level cars and fuel-efficient commuter two-wheelers.

The Budget also allocated additional funds towards replacing old, end-of-life vehicles of the Central and State governments as well as old ambulances, and the step is clearly aimed at driving new vehicle sales.

While the Economic Survey forecasts a lowered GDP growth projection between 6.4 and 6.8% for FY2024 (FY2023: 7%), India is still poised to achieve the fastest growth among all major economies in the world. With the Budget’s growth-oriented agenda, there is a consensus in India Auto Inc that these measures which aim to turn the wheels of the economy will tremendously benefit the automotive industry and accelerate demand for vehicles.

What India Auto Inc says about Budget 2023-24

According to Shashank Srivastava, Senior Executive Officer, Maruti Suzuki India, “The planned capex at Rs 10 lakh crore is now 3.3% of the country’s GDP, and this is the highest it has ever been. It will positively impact consumption as well as supply sides of the economy. While in the short term, this will help generate demand, in the medium- and long-term future, it will help create capacities for further expansion, and indirectly generate more employment.”

Srivastava further told Autocar Professional that the reduction in income tax will result in higher disposable income in the consumer’s hands, “and therefore, it should lead to a higher propensity to spend.” However, he cautioned that inflation will be a key factor to watch out for as it will eventually dictate consumer spending.

“An automobile is a discretionary purchase and disposable income is not just income after taxes but also minus the inflation. Fortunately, the inflation projected for FY2024 is less both globally and particularly for India,” he added. Srivastava further red-flagged higher interest rates, crude oil, and commodity prices as well as geo-political issues which could impact vehicle exports from India.

Vinod Aggarwal, President, Society of Indian Automobile Manufacturers (SIAM), who echoed Srivastava’s views, said, “Lowering of effective personal income tax rates should increase consumption and consequently, lead to more demand for the automobile industry.”

Sunjay Kapur, President, Automotive Components Manufacturers Association of India (ACMA), said, “It was a good growth-oriented Budget, with a lot of positives in terms of infrastructure spending, circular economy, credit-guarantee schemes for MSMEs, older vehicle replacement, as well as focus on AI, and 5G, which are particularly positive moves for the manufacturing sector.”

Kapur also believes that the government’s encouragement towards the start-up ecosystem by offering them tax benefits will indirectly help the automotive industry as it increasingly deepens connect with start-ups as it goes towards embracing future mobility technologies.

Tax benefits for start-ups with indirectly help the automotive industry which is deepening its connect with them in the drive towards future mobility tech.

“Furthermore, the stress upon inclusive development, last-mile infrastructure, and green growth – these are all exciting for us as an industry, and everything adds up together with the existing PLI and FAME-II schemes. The exemption on customs duty for machinery to manufacture Li-ion battery cells for EVs is a step in the right direction and in line with the government’s broader roadmap of sustainability,” Kapur told Autocar Professional.

“There will likely be more domestic consumption due to lower tax rates which should put more money in the hands of the end consumer, and therefore result in better sales for the overall vehicle industry. I am very pleased with the Budget,” he added.

“The increase in capex on infrastructure and the emphasis on green growth will help the mobility sector. This Budget gives something to everyone – from rural India, start-up India, middle-class India, to digital India – it is about inclusive growth and building on the recovery we are seeing after the pandemic. It strikes a fine balance between growth and fiscal prudence,” said Sudarshan Venu, Managing Director, TVS Motor Company.

Arathi Krishna, Managing Director, Sundram Fasteners says, “The government has ensured that India advances and becomes a modern economy. The domestic automotive industry has significant growth potential, driven by a variety of factors, and in order to maintain momentum, the government has consistently prioritised technology connectivity, world-class infrastructure development, and an EV landscape. Furthermore, there is growing environmental concern, which is urging the government to promote green mobility. The government's explicitly realistic announcements will benefit industries such as manufacturing and sustainability.”

Manish Raj Singhania, President, Federation of Automotive Dealers Associations (FADA), commented, “There is a significant reduction in the income tax rates, which would therefore ensure higher disposable incomes. It is a big positive for the automotive industry and two-wheelers as well as entry-level cars will particularly benefit the most.

“The commercial vehicle (CV) industry is also set to benefit from the government’s infrastructure push and with vehicle dealers falling under MSMEs, the credit-guarantee scheme augurs well for the vehicle retail ecosystem,” he added.

Budget 2023-24 allocates additional funds to scrap old, polluting vehicles in Central and State government fleets, which will lead to new vehicle purchase.

Building upon the Vehicle Scrappage Policy of 2021-22, the government also allocated more funds in the Budget to replace older and polluting vehicles in the Central and State government fleets. “For the Scrappage Policy to get implemented, the government must lead and they have clearly set an example. It will give a fillip to new car sales and will ensure lesser polluting and safer vehicles on the road,” Singhania told Autocar Professional.

According to Nikunj Sanghi, Managing Director, JS4Wheels, “While there might not be a very big cash surplus in the consumer’s hands, owing to the reduction in income taxes, the upside is that the move will generate a positive sentiment in the industry.

“The huge focus on infrastructure spending will generate income in the hands of people and the additional money that gets pumped in the economy will lead to more jobs, and it could spur demand. With a low fiscal deficit, there will not be too much of inflation, which is another positive for the economy,” Sanghi added.

Chetan Maini, Co-founder and Chairman of Sun Mobility, said: “I applaud the government’s continued efforts to accelerate the country’s transition to sustainable development and green growth, focusing on green fuels, energy, building practices and creating new ‘green’ jobs, besides leading to reduced carbon intensity. The allocation of Rs 35,000 crore for green transition is a huge step forward towards green growth. However, the industry looks forward for the government to share more insights about the capex allocation to support the commercial vehicle sector as part of the agenda. It is encouraging to see the government’s decision on viability gap funding for battery storage solutions and continuation of lower customs duty on lithium-ion cells. The scrappage of old government vehicles and budgetary allocation towards the same, is a positive step forward."

Maini added, "While this Budget is impactful, I feel that release of the Battery Swapping Policy, covering subsidies and GST rate rationalisation from 18% to 5% on EV batteries, would have added further to the green growth agenda.”

Localisation of EVs unplugged

To enable a greater offtake of electric vehicles (EVs) in line with its roadmap of sustainable growth and achieving carbon neutrality by 2070, the government also announced measures to drive localisation of electric vehicles (EVs) and their components in India. The Budget proposed to exempt custom duties on the import of raw material and machinery for manufacturing of lithium-ion battery cells for EVs.

“The focus on sustainability is a step in the right direction and it will consistently drive green mobility in the country,” said Santosh Iyer, Managing Director, Mercedes-Benz India. Moreover, the government also hiked the custom duty applicable on a completely-built-up (CBU) imported EV from 60% to 70%, as well as duty applicable on all semi-knocked down (SKD) vehicles (including EVs) from 30 to 35 percent. The duties on vehicles imported in the form of completely-knocked down (CKD) kits, however, remained stable at 10% in the Budget.

According to Iyer, “The change in basic custom duties is going to impact the prices of some of our select models like the S-Class Maybach (SKD), as well as CBUs like the GLB and EQB, making them dearer. However, as we locally manufacture most of our models, this will not affect 95 percent of our portfolio.”

Skilling initiatives score high

The Budget also focused on skill development and brought a huge push to the National Apprenticeship Programme with the government announcing fiscal support in terms of direct stipend transfers to 47 lakh youth over the next three years. “With the FY2023 target of direct-benefit transfer to 10 lakh youth close to getting accomplished, the new target looks very much feasible,” said Arindam Lahiri, CEO, Automotive Skills Development Council (ASDC).

The government also strengthened the digital skilling ecosystem in the country by announcing the launch of a digital platform that would bring employers and trainers under one roof and link them directly. “It is aimed at reducing the skill-matching issue that we were facing,” Lahiri told Autocar Professional.

The skilling push also identified new-age courses such as mechatronics, 3D printing, robotics, and AI. “These new courses will ensure increased industry-academia collaboration as these domains are relevant for the automotive industry.”

“Lastly, the Budget’s focus towards making India a skill capital is commendable. It is going to get more action-oriented on the ground because there is a plan to set up Skill India international centres for skilling for international opportunities. The government is already working on one of such centres, and now that there is a vision for it, people aspiring to go overseas would be able to go through a proper channel,” remarked Lahiri.

With a sizeable income tax relief and push on infrastructure development, Union Budget 2023-24 has clearly emerged as a growth accelerator for various sectors of the economy, putting India in a sweet spot in a world experiencing troubled times. While there will continue to be headwinds in the form of inflation and geopolitical tensions, the resilient domestic market, for automotive as well as other sectors, is likely to deliver the goods in FY2024 and make India get noticed even more on the world map.

Capex on infrastructure increased by 33 percent to Rs 10 lakh crore for FY23-24 in Budget 2023

Autocar Professional Bureau — Wed, 01 Feb 2023 22:31:33

The Union Budget 2023 has allocated Rs 10 lakh crore for capital investments and Rs 79,000 crore for affordable housing. This increase of 33 percent bodes well for commercial vehicle demand, especially for heavier multi-axle vehicles and tippers, industry experts believe. Furthermore, the LCV industry is expected to gain from the Rs 75,000 crore investment in enhancing first- and last-mile connectivity for chosen sectors, they noted.

In her Budget presentation, Finance Minister Nirmala Sitharaman said that the Budget spending on infrastructure development, which will be 3.3 percent of GDP and the newly created Infrastructure Finance Secretariat will help bring in more private investment. “This will be almost three times the outlay in 2019-20,” Sitharaman said.

According to the FM, an expert committee will study the harmonised master list of infrastructure projects and make recommendations on the classification and financing framework. She claimed to have identified one hundred critical transportation infrastructure projects for the ports, coal, steel, fertiliser and foodgrains sectors. “They will be taken up on priority with an investment of Rs 75,000 crore, including Rs 15,000 crore from private sources,” she said. The finance minister said that investments in infrastructure and productive capacity have a big multiplier effect on growth and employment. Following the pandemic's lull, private investment is picking up again.

Given that India has the second-largest road network in the world, with 5.89 million kilometres of roads, this seems like a big step forward. This road network transports 64.5 percent of all commodities in the country and 90 percent of the passenger traffic in India.

Sandeep Singh, MD of Tata Hitachi Construction Machinery, said that roads, construction, irrigation, housing construction, and mining have been the main drivers of the construction equipment business. He highlighted that road construction has gained pace in the last few months, which has already become a cause for cheer. “With the further boost of 33 percent to Rs 10 lakh crore for infrastructure development in 2023–24, construction will increase business for the CE sector. Green highways, low cost housing in rural areas will spur demand,” Singh added.

Deepak Shetty, Chief Executive Officer and Managing Director, JCB India, stated that the union Budget 2022-2023, which pushes for infrastructure development by increasing capital investments, will help in creating demand for construction equipment and create jobs, apart from removing infrastructure bottlenecks. “Continued provision of a 50-year interest free loan to state governments for one more year will spur investment in infrastructure,” Shetty said, emphasising that the announcements lay India's development path to becoming a $5 trillion economy.

“Supporting urban infrastructure and the move to prioritise 100 critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertiliser and food grain sectors are welcome. For this, the investment of Rs 75,000 crore, including Rs 15,000 crore from private sources, will further create demand for construction and create jobs, apart from removing the infrastructure bottlenecks", Shetty said.

Vinod Aggarwal, President, SIAM, and Managing Director and CEO, VECV, said, “The 33 percent increase in capital outlay with an effective provision of Rs 13.7 lakh crores will spur growth in the economy, resulting in a positive impact on the auto sector.” He also said that it is a good thing that the government has announced money to help replace old vehicles in different departments.

Dheeraj Hinduja, Executive Chairman, Ashok Leyland, said, “The budget emphasises comprehensive national infrastructure development and expands on the digitisation of the economy. The road transportation sector plays an important role in national development and will have an even more impactful role, going forward, in supporting the government's vision. The announcement that old vehicles owned by the central government and state governments will be replaced as part of the vehicle scrapping policy presents a significant opportunity for fleet modernisation.”

Welcoming the government's increased infrastructure related outlays, Stefano Sanchini, MD, Bridgestone India, said that it will directly impact the logistics and mobility sectors. “These sectors will also grow as they expand to serve the enhanced demand for goods generated by new infrastructure projects,” said Sanchini.

Shamsher Dewan, Senior Vice President and Group Head of Corporate Ratings, ICRA, said, “The fund allocation towards the scrappage of old government vehicles and the extension of interest-free loans to state governments for the same will spur replacement demand, especially for buses.”

E-mobility sector largely cheerful with government's focus on green growth in Budget 2023-24

Autocar Professional Bureau — Wed, 01 Feb 2023 21:36:47

Finance Minister Nirmala Sitharaman’s Budget has brought optimism and relief to the Indian automobile industry’s green players. The Budget has funded numerous programmes for green energy, green farming, green transportation, green equipment and energy efficiency policies across multiple economic sectors. Reduction in taxes and duties of several sectors associated with e-mobility and relief in income tax resulting in more consumer spending power augurs well for the sector.

The electric two-wheeler industry will be one of the biggest gainers as cuts in income tax will put more money into the consumer's pocket. Jeetendra Sharma, Managing Director and Founder, Okinawa Autotech said, “The reduction of indirect taxes from 21 percent to 13 percent as well as relief in personal income tax will improve consumer confidence and purchasing power in the country.”

After eight hikes in CY2022, which took the price of Compressed Natural Gas to an all-time high of Rs 89.50 per kg, CNG users are likely to see some price reductions. The 2023 Budget has reduced taxes on compressed biogas that is blended with CNG. There is an allocation of Rs 10,000 crore for compressed biogas plants which is expected to ease the high CNG prices in the country.

During the Budget 2023 speech, Finance Minister Nirmala Sitharaman said, “To avoid cascading of taxes on blended compressed natural gas, I propose to exempt excise duty on GST-paid compressed biogas contained in it. To further provide impetus to green mobility, customs duty exemption is being extended to import of capital goods and machinery required for the manufacture of lithium-ion cells for batteries used in electric vehicles.”

Society for Manufacturers of Electric Vehicles, Director General Sohinder Gill welcomed the FM's move to extend the custom duty relief for lithium-ion cells and exemption in customs duty for the machinery required to manufacture batteries. He also lauded the FM for increasing the duty on SKD/CBU as it will incentivise local suppliers because of the relative price advantage. “There are still many parts of electric vehicle (EV) componentry such as lithium cells, permanent magnets for electric motors, semiconductors, etc that will need to be imported. We expected rationalisation of customs duty on such essential imports to help keep the EV prices in check.”

Gill added that the continuation of the customs duty-free status for machinery used to produce lithium-ion batteries could result in some stabilisation of battery prices and will thereby help to reduce the prices of EVs in the long term.

Samrath Kochar, CEO and Founder of battery manufacturer Trontek says the Budget is pragmatic and has taken the right steps toward advancing green mobility adoption in the country. “Removal of customs duty on imported machinery used for manufacturing Li-ion batteries will bring down the cost of EV batteries thereby reducing the cost of EV adoption. Going forward, we are certain that the government will also look at bringing a PLI scheme for battery pack manufacturers and also reduce GST on batteries to benefit the many MSMEs operating in the EV sector.”

Rajeev Singh, Partner, Deloitte India said that from an auto sector perspective, the increase in outlay and the focus on Green India should also assist in transitioning of Auto Industry to Clean Mobility.

As part of the government's hydrogen push, the finance minister rolled out Rs 19,700 crore towards the government's Green Hydrogen Mission to lower carbon intensity and reduce fossil fuel use. She also announced a five million tonne target for green hydrogen production by 2030 along with a ‘Green Credit Programme’ to promote behavioural change.

Sulajja Firodia Motwani, Founder, and CEO, of Kinetic Green, welcomed the FMs shift towards hydrogen fuel-powered mobility. “The Union Budget 2023 is positive for the auto sector and has reinforced the government’s commitment to accelerating the EV and green mobility eco-system in India, especially the extended outlay given for the adoption of the nation’s hydrogen programme.”

Executive Vice Chairman of two- and three-wheeler maker Greaves Cotton, Nagesh Basavanhalli applauded the government’s plan to use clean power in component and vehicle manufacturing. “There is a great opportunity to build the requisite clean tech infrastructure for EVs. The investments in ‘Made in India’ EV components, besides product and innovations will give us better control of the entire carbon chain,” he said.

An official from another three-wheeler manufacturer, Reliance-backed Altigreen, while welcoming the FM’s move to provide relief in custom duties for battery makers, said that they hope the government will extend these for three years to provide a stable policy environment for the industry.

Rudra Pandey, Partner, Shardul Amarchand Mangaldas, said that the Budget could become a lucrative avenue for passenger car EV makers. “These much-needed incentives will boost demand for EVs in India and encourage foreign investments in the Indian EV sector,” he said.

Battery swapping major Sun Mobility said the government’s decision to announce viability gap funding for battery storage solutions and scrapping of old government vehicles is good for the EV Industry. Co-founder and Chairman of Sun Mobility, Chetan Maini, said he had hoped that the FM would rationalise GST rates from 18 to five percent on EV batteries as it would have added further to the green growth agenda. But that didn’t happen.

India Auto Inc seeks GST rationalisation to accelerate demand

Autocar Professional Bureau — Tue, 31 Jan 2023 15:19:49

Expectations will be running high from the upcoming Budget with the automotive industry unitedly expecting a harmonisation of the goods and services tax (GST) on various automotive components, and the move could give a huge demand-generation push to the sector. The industry body - Automotive Components Manufacturers Association of India (ACMA) – has been voicing its demand for a very long time to rationalise GST on components in order to give a fillip to the industry. “Though it is not strictly a matter of the Budget, our key request to the government is to bring a uniform 18 percent GST rate across components,” said Vinnie Mehta, director general, ACMA.

"Having said that, we are also thankful to the government for the allocations of FAME and PLI that are in the interest of the auto industry," Mehta adds.

According to Akash Minda, executive director, Minda Corporation, "We are looking forward to a Budget that supports both the manufacturing sector and the consumer. The transition of the sector towards electric vehicles needs special focus. To build an upward tick within the EV market, government schemes should strengthen the indigenous EV industry. The focus must be on providing incentives and schemes to aggressively build a robust ecosystem that supports the infrastructure, supply chains and material required for growth. This will ensure India's participation in contributing to the EV revolution in India as well across global markets.

"We urge the government to consider incentivising the journey of ‘electronification’ by rationalising the GST rate for auto components. While EVs are priced with a 5% GST, component manufacturers are currently mandated to pay GST of 18% to 28%. We are hoping for a tax standardisation that will help the component manufacturers scale up and strengthen to provide parts and consistent quality and reduce litigation."

“Of the 219 various tariff lines, the auto industry has 40 percent of the tariffs that are over 18 percent. There is an urgent need to harmonise GST to below 18 percent for all components,” said Harshvardhan Sharma, head, Auto Retail Consulting Practice, Nomura.

Hemal Thakkar, director, CRISIL Market Intelligence and Analytics, also emphasised the need for a uniform GST for components. “The production linked incentive (PLI) scheme, among other measures, supports advancement in transmission and electronic systems. However, the dual GST rate - 18 percent and 28 percent – on automotive components encourages grey market distribution in the aftermarket space. “This is a safety hazard as well as an incentive for the informal economy that leads to a loss of GST revenue. So, it is best to move to 18 percent for all components,” said Thakkar.

The automotive sector, especially the ICE component makers, have set high hopes from the Budget 2023-24, and expect it to bring transformations and relaxations for the industry. “The government should consider introducing policies and schemes to bolster small industries and businesses. This would have a positive impact on the prices, as bridging the supply chain gap would restore balance in the market and curb the rising prices” said Lalit Khetan, CFO, Ramkrishna Forgings.

2W OEMs seek demand-side measures
The ICE two-wheeler industry has been facing a lot of stress at the belly of the market in the 100-110cc vehicle category, where the inflationary pressures have hit the rural economy hard. Rakesh Sharma, the executive director, Bajaj Auto, hopes the finance minister will support the rural economy. According to Sharma, “Measures that increase disposable incomes and give more purchasing power to the rural economy will translate into higher sales of entry-level bikes and scooters.”

Kotak Securities’ vice president Arun Agarwal too is mirroring the view of two-wheeler OEMs. He says that the Budget should take concrete steps to support rural income which will indirectly benefit the entry-level two-wheeler as well as the tractor segments which are under stress.

EV players request for policy support
Meanwhile, the electric two- and three-wheeler manufacturers unanimously agree that for building a strong EV ecosystem, government support is critical for the Indian electric two- and three-wheeler industry.

Aditya Munjal, director, Hero Cycles, says that with the upcoming Budget 2023-24, the company is hoping for the inclusion of cycles and e-cycles in the existing schemes and policies such as PLI and FAME-II, that would help transform the bicycle industry in the country.

In the two-wheeler space, Matter Energy founder and CEO Mohal Lalabhai believes that the PLI scheme can be made more inclusive to include start-ups. According to Lalabhai, “The ex-factory price for electric two-wheelers should be raised from the current Rs 150,000 ex-factory to Rs 200,000 to support advanced technology development for scooters and motorcycles in the country.”

“Reduction in customs duty on the import of lithium-ion cells will reduce the overall upfront costs of battery production and significantly bring down the cost of acquisition for electric vehicles in India,” Lalabhai added.

Another upcoming two-wheeler manufacturing small and medium enterprise (SME) player Virtual Forest is creating capacities for manufacturing motor controllers for electric two- and three-wheelers. According to the company’s founder and CEO, Omer Basith, "We hope that the SME industry too can benefit from extending the PLI in cell manufacturing to SMEs that are investing in the component space.”

In the three-wheelers category, Uday Narang, chairman, Omega Seiki Mobility, says that there is a need for standardisation of battery voltages and various form factors. “The finance minister should consider an extension of the FAME-II subsidy for retrofitting ICE vehicles to electric,” he said.

Need to step up EV financing
Narang also says that improving finance options by giving priority-sector status for EV financing and correcting the GST inverted duty structure is expected from the finance minister.

Dr. Amitabh Saran Founder and CEO of Altigreen said commercial banks need to be pushed to step in with financing support and reduce the interest rates. “We also look forward to the rationalisation of GST rates. Currently, 5 percent GST is levied on EV sales but OEMs pay 28 percent GST for spare parts. Bringing them under the five percent bracket can lead to a price reduction and an uptick in EV adoption,” Saran pointed out.

Representatives of e-rickshaw makers who have been at the heart of growth for India’s EV industry are also batting that the government needs to focus on lowering interest rates for EV financing and standardising residual battery-value calculation. “We need to revisit EV financing issues and address the challenges regarding the cost of finance," says Nitin Kapoor, MD and CEO, Saera Electric.

Kapoor also said that the government must focus on creating awareness about the vehicle scrappage policy to encourage the phasing out of end-of-life vehicles and drive EV sales.

A case for PLIs for green hydrogen and electrolysers

Vehicle OEMs are also of the view that green hydrogen and electrolysers should be added to the PLI schemes as zero-emission technologies need to be powertrain agnostic.

“Electrolysers and Hydrogen 2ICE engines are new technologies that should be added to the Auto PLI scheme and government support to the R&D community through incentives would be appreciated by the industry,” said Rajendra Petkar, CTO of Tata Motors and President, ARAI. Petkar voiced his thoughts in an address at a recent ARAI (automotive research association of India) event in Pune.

Meanwhile, passenger vehicle majors including Maruti Suzuki and Toyota Kirloskar who have taken big bets on hybrids are looking to the government to provide them relief in the form of reduced GST rates and seeking parity with EVs. Hybrids attract peak duties of 28 percent and 43 percent, compared to 5 percent GST implementation on EVs.

Boosting the EV ecosystem, rationalising duties
Those in the business of providing charging infrastructure believe there is a case for a reduction in the rates that consumers are charged. Some also hope for incentives in the budget. Kartikey Hariyani, founder and MD, Charge Zone, says, “Faster tax depreciation for electric vehicles and charging infrastructure will ensure that the charging industry benefits. Also, the 18 percent GST for customers can be reduced.”

“One of the key expectations from the Budget is reduction in the GST rate, from 28% to 18%. It will greatly support the home-grown players to invest in newer technologies for enhanced mobility offerings, even at the global level,” says Sanjeev Vasdev, managing director of Pune-based Flash Electronics.

In the battery material and recycling space there is a demand from the industry that PLI should be extended beyond the current ACC structure. Rajat Verma, founder and CEO, Lohum Cleantech, said, “The time is now to promote battery recycling to accelerate this shift and magnify the industry with measurable rewards.”

Some of the other players in the system including companies in the battery swapping space are of the view battery swapping service is at 18% GST and must be aligned with EVs at 5 percent.

Ankit Mittal of battery-swapping firm Sheru says that with demand for EV components going up and various EV component manufacturers increasing prices, the government needs to extend PLI on Advanced Chemistry Cell (ACC), to give a fillip to the manufacturing of electronic components for EVs in India.

The industry is hopeful that the finance minister will reveal a growth-oriented Budget - one that accelerates demand for vehicles, thereby helping the entire ecosystem - in her speech on February 1, when all eyes will be glued towards measures that give the automotive sector a shot in its arm.

Transporters body demand revocation of tyre import ban in upcoming budget

Autocar Professional Bureau — Mon, 30 Jan 2023 18:33:52

Alleging tyre manufacturing companies to be working under a cartel for keeping the cost of tyres high, the All India Motor Transport Congress (AIMTC) – a lobby group representing approximately 75 lakhs truckers and around 5 lakh private bus operators, has demanded the removal of the restrictions on its imports in the upcoming union budget so as to bring fair competition, resulting in a reduced transportation cost, they claim.

"Tyre is a significant expense of the transport business. Tyre companies in the country have formed a cartel and consumers are being looted. Restrictions on the imports of Tyre and anti-dumping duty should be removed so that fair competition could be maintained and transport cost can be reduced" said Bal Malkit Singh, Chairman- Core Committee, AIMTC.

AIMTC's demand has reignited the controversy around Competition Commission of India (CCI)'s final order in February last year against five tyre companies, Apollo Tyres, MRF, CEAT, JK Tyre, and Birla Tyres, and their association, Automotive Tyre Manufacturers Association (ATMA), for cartelization by acting in concert to raise the prices of cross ply/bias tyre variants sold by each of them in the replacement market, as well as to limit and control production and supply. The Commission levied penalties of Rs 425.53 crore on Apollo Tyres, Rs 622.09 crore on MRF, Rs 252.16 crore on CEAT, Rs 309.95 crore on JK Tyre, and Rs 178.33 crore on Birla Tyres, in addition to issuing a cease and desist order. ATMA was also fined Rs 0.084 crore. ATMA was also required to disengage and remove itself from collecting wholesale and retail prices through member tyre businesses or otherwise. Tyre manufacturers, on the other hand, refuted the allegations strongly.

"Restrictions on the imports of Tyre and anti-dumping duty should be removed so that fair competition could be maintained and transport cost can be reduced" says Bal Malkit Singh, Chairman- Core Committee, AIMTC.

Earlier with the intention to encourage indigenous industries, India had banned the import of tyres since June 2020 and levied anti-dumping duties.

Secondly, the transporter's body also stated that in respect of various toll routes of National Highway Authority of India (NHAI) where build-operate-transfer (BOT) roads have completed their tenure and Public Funded (PPP) roads have had 100% capital recovery; although toll is being collected at 100% instead of 40%, despite the notified rules. "Study of all toll routes across the country should be done to identify routes where the toll rate should be brought down to 40% and poor road users should be given their due benefit" it added.

Furthermore, AIMTC is looking for the withdrawal of TDS on transport business, which was first introduced in the 2015 budget. "We hope that applicability of the TDS under Section 194 C and 194 N of the IT Act will be eradicated from the transport business in the upcoming budget as it is not practical and pointless, rather it has become an additional burden on the transport business" Singh added continuing that innumerable memorandums, reasonable arguments to abolish it, agitations have been held since then although in vain.

Reduction in automotive fuel prices, rationalization in GST on lubricants, spare parts, vehicle insurance amongst others, increase in scrappage age of BS VI vehicles to 25 years from 15 years at present, are the other issues which AIMTC highlighted for change in the upcoming budget.

'Need to subsidise electrical connections and fixed-load fees for EV CPOs': Amit Gupta

Autocar Professional Bureau — Mon, 30 Jan 2023 15:51:35

Charging infrastructure is extremely critical to ensure the healthy offtake and success of electric vehicles which have started to grab the attention of the Indian customer looking to buy either an electric vehicle on two or four wheels. A number of private EV charging infrastructure providers have swung into action to support the EV OEMs' endeavour of charging ahead with the sales of their radical, futuristic electric vehicles, and are now seeking the government's support to accelerate their network establishment and ensure a better viability of the busines model.

According to Amit Gupta, head, Energy Infrastructure Solutions, Delta Electronics India, "Delta firmly believes that the Union Budget 2023–24, which will be unveiled at a pivotal time of geopolitical unpredictability, high inflation, and sluggish global economic growth, will aid the EV industry in moving forward and accelerating the adoption of EVs.

"E-mobility will advance in India as a result of newly announced government measures to improve the infrastructure for charging. Grid connectivity will be improved, and installing infrastructure for public charging will be made simpler. However, the part needs a bigger push. The industry needs more assistance to encourage private enterprises to build charging infrastructure, which will facilitate the widespread adoption of EVs," he added.

The company's advanced EV charging solution offerings aims to enable the ecosystem to keep pace with the growing demands for a robust electric automobile infrastructure.

Gupta further mentioned that infrastructure for charging requires capital-intensive design and installation costs, and the sector's top aim is to keep capital costs as low as feasible. "The proper course of action for making it easier to install charging infrastructure is to facilitate grid connectivity, but it is crucial for the sector that the government also subsidises electrical connections and fixed load fees for EV charging point operators," Gupta said.

"The government has encouraged the use of charging stations by setting the GST at 5% on the sale of charging stations, but the GST rate is 18% when using the infrastructure. Given that many people utilize these charging stations and do not qualify for an input tax credit, the government must reduce this GST to 0%, just like it does with the sale of energy," he added.

Gupta also suggested a three-pronged strategy for giving an impetus to the charging infrastructure space. His recommendations to the government included:

Making low-cost renewable energy available
The transition from expensive fossil fuel-based power generation to affordable renewable energy will aid in making EV transportation really viable. By supporting strategies like open access to solar energy, it will be possible to increase the supply of RE electricity while lowering operational costs.

Revenue generation
Installing EV charging infrastructure requires significant investment. The industry can be made more profitable in a number of ways, including by enhancing promotion, introducing smart charging services, and investigating network interoperability to lower latency, increase revenues, and lower expenses.

Make charging stations a part of green building
India is putting an emphasis on smart cities and green construction. The proper charging infrastructure is crucial for both new green real estate projects and existing real estate including industrial, commercial, and residential complexes.

"All these measures will promote sectoral growth and open up opportunities for the industry to generate income," Gupta signed off.

'Expect FAME subsidy to continue for a few more years': Mahesh Babu

Autocar Professional Bureau — Mon, 30 Jan 2023 14:50:45

While electrification is on the rise across vehicle categories in the Indian market, the electric bus (e-bus) segment has particularly seen a sharp growth in the recent past owing to various state transport undertakings (STUs) placing big orders for greener public transportation solutions.

According to Mahesh Babu, CEO, Switch Mobility, “India is making an intense push for faster adoption of electric buses, and the segment has seen exponential growth over the years. Given this scenario, one of the key expectations from the budget is continuation of the faster adoption and manufacturing of electric vehicles (FAME) subsidy, for at least few years and a reasonable EV penetration in the commercial vehicle segment.

"In order to democratise sustainable mobility, priority and access to funds, with payment guarantee by STU’s is a pragmatic solution for EV bus adoption. Hence, we hope to see measures, aimed at supporting financing and funding of electric public transportation projects, as bankability of contract is seen as high risk. Government’s support through priority lending would also help meet the aggregated demand. We hope the government continues its thrust on infrastructure and drives us forward on the path to higher growth," Babu added.

Hitesh Garg, India Country Manager, NXP Semiconductors

Resonating with Babu's thoughts, Hitesh Garg, India Country Manager, NXP Semiconductors, said, "The FAME-II scheme is currently slated to expire on March 31, 2024. We expect the government to continue with the effective measures to encourage the faster adoption and manufacturing of electric vehicles in India."

'We expect more sectors to be brought under the PLI umbrella:' Satyakam Arya

Autocar Professional Bureau — Mon, 30 Jan 2023 13:28:09

The commercial vehicle (CV) segment which is the barometer of a country's economy is witnessing green shoots in India with the government's relentless push to drive infrastructure development by rapidly building new networks of highways and expressways. While the macro-economic factors look set to continue driving growth in the CV sector in the coming fiscal - FY2023-24 - Daimler India Commercial Vehicles (DICV) anticipates strong rural demand to drive growth in the small- and medium-sized commercial vehicles as well.

According to Satyakam Arya, managing director, DICV, “We anticipate FY2022-23 to be an inflection point for India. Despite the pandemic and supply chain challenges over the past 2-3 years, India has demonstrated incredible resilience and a hunger for growth. India’s transformation is a highly encouraging opportunity for the industry as a whole because we clearly want to become the destination that global businesses desire, especially when economies in developed markets are showing signs of a slowdown. While, the slowdown in global economies may ostensibly influence the pace of India’s economy in some ways, the push to grow from our side is much stronger and India’s strategic vision will keep us in good stead.

"Rapid development of urban and rural infrastructure is expected to give a major boost to the overall economy, consumption of raw materials like steel and cement is expected to be strong and as a result this would increase demand for heavy-duty trucks. Rural demand is expected to be strong and resilient, increase in e-commerce is keeping consumption active and growing at a retail level, all of which will provide impetus to demand for medium and small vehicles," he added.

"We are also expecting that more sectors would be brought under the PLI umbrella scheme which has given a lot of confidence to the industry since it was introduced. Supply chain issues over the past years was a big learning and an even bigger opportunity for India to stand up to the challenge and become the supplier to the world. With many Free-Trade Agreements(FTAs) on the cards, India’s push towards exports would be a welcome opportunity.

"All in all, given the big push towards strengthening India’s economy by developing global standards of infrastructure, opening the gates to technology development, expanding manufacturing strength to multi-tier markets within India, the CV industry has a big role to play in building India’s economic identity on the world stage. Of course, implementation of comprehensive strategies is the key to success and the industry would be keen to participate in this exercise. The calendar 2023 is also an important year for the Indian populace to participate in the direction the country will take to create a solid future," Arya said.

'A reprieve on GST will come as a welcome move': Prashanth Doreswamy

Autocar Professional Bureau — Mon, 30 Jan 2023 13:19:46

For Continental India, the domestic arm of German Tier-1 major, the upcoming Union Budget 2023-24, holds a lot of potential to spur growth in India's evolving electric mobility segment. The company also expects the government to give policy thrust for India to become an engineering-research and development (ER&D) hub of the world.

According to Prashanth Doreswamy, president and CEO, Continental India, "Many automotive suppliers will be keenly following the Union Budget in a hope that the government introduces the right initiatives to incentivise efforts being made and accelerate the industry’s growth. "

"Considering the fact that the auto industry contributes about a sizeable six percent to India’s GDP. A reprieve on Goods and Service Tax (GST) will come as a welcome move. The focus over the last year has been on efficiently implementing clean and green mobility, and I hope there to be a relief on the GST levied on EV parts like lithium-ion batteries and ancillaries. There was widescale anticipation during the last budget that GST for the aforementioned would be slashed but it continued to remain at 18-28 percent. This is something that in my opinion will be reviewed and implemented in 2023."

Rationalisation of GST on vehicles
Doreswamy further mentioned that high GST rates are making vehicles - both cars and two-wheelers - unaffordable for buyers especially with increased prices of raw materials, fuel prices, and tougher regulations having already burdened the cost.

"The government should look at long-standing demand of automotive industry for lowering GST rates, which are currently taxed at 28 percent with a cess levied depending on body and engine size. Therefore, I earnestly hope there is a reduction of GST on car safety devices and features to make them a lot more affordable and accessible.

"There is a very strong need to extend/continue granting fiscal incentives towards export of ER&D services undertaken in core sectors like automotive. In India, including research and experimental development in natural and inter-disciplinary fields like engineering and science, which aims towards developing innovative digital products and solutions. These incentives could be provided through continuation of SEIS.

"We understand there are suggestions to have an upper cap to claim incentives to enhance participation especially from MSME sector. While, this is very much appreciated, however, given potential of ER&D in core sectors like automotive, both in terms of export potential and employment generation, services like ER&D could be excluded from such capping."

"Service units set-up in SEZs/EOUs/STPIs should be allowed to avail benefit of these schemes," Doreswamy said.

"On a concluding note, I also look forward to the government extending the PLI or production linked incentive scheme for auto and auto component manufacturers, particularly for organisations focused on exports. In addition, there has been a zealous case made for FAME II to be extended beyond 2024, a decision, if made, will prove highly beneficial for the industry," Doreswamy signed off

'Need for long-term outlook, continuation of stable policies': Santosh Iyer

Autocar Professional Bureau — Sat, 28 Jan 2023 14:33:16

Country's No. 1 luxury carmaker - Mercedes-Benz India - which registered its best-ever year in India in 2022 by selling 15,822 units (+41%), is keeping a close watch on the Budget 2023-24 that is set to be revealed on February 1. The company is hopeful that the upcoming Budget will roll out policies that give an impetus to electrification whilst being future-oriented and stable in the long run.

According to Santosh Iyer, managing director and CEO, Mercedes-Benz India, “We are optimistic about the upcoming Union budget and expect it to be progressive and forward-looking, acting as a catalyst for India’s long-term growth trajectory. We hope for continued capital outlay for development of roadways and infrastructure, with a timely implementation of the ongoing projects."

"In recent years, we have witnessed the direct impact of better roadways and inter-state connectivity in propelling demand for automobiles, and boosting the industry and economy. We welcome the policymakers’ continued strategic focus on electrification and request for a long-term outlook and continuation of these stable policies, encouraging e-mobility adoption in India.

"The current tax incentives and other benefits should continue for a period of 8-10 years in order to boost growth in the EV segment, advancing the inflection point for EVs and making the auto industry gain the critical mass for these vehicles. Incentivizing the creation of charging infrastructure will play an important role in expediting EV adoption in the country and boosting customer confidence.

"Finally, we wish for reconsideration of the current import duties for EV’s to boost their demand, resulting in a faster acceleration for achieving the Government’s vision of a sustainable green mobility ecosystem in the country,” Iyer said.

SMEV bats for GST rationalisation on components for the EV segment to charge ahead

Autocar Professional Bureau — Sat, 28 Jan 2023 14:21:50

Sohinder Singh Gill, CEO of Hero Electric and Director General of the Society of Electric Vehicle Manufacturers of India (SMEV), has been championing the cause for India’s fledging EV industry and pushing the government towards offering supply-side support like the rationalisation of the GST or goods and services tax.

In an exclusive interaction with Autocar Professional, Gill points out that while India has made rapid strides in EV adoption, other initiatives like R&D for localisation of products, supply-side support, charging infrastructure, and GST rationalization are much needed to spur the EV ecosystem in the country.

“It is important at this juncture that we focus on building a strong EV ecosystem that makes us self-sustainable. We believe that no policy can be cast in stone and must be dynamic to factor on ground challenges during its implementation.”

Gill adds that with government support, the Indian EV industry can become a global hub for EV exports. We ask him what his expectations are from the Union Budget FY2023-24.

What would be your top asks from the finance minister (FM) on the taxation-related concerns for the EV industry?
In my view, uniformity of the goods and services tax (GST) is the single-largest ask of the EV industry. While 5% GST is levied for the vehicle; for spare parts, there is no clarity and the industry ends up paying up to 28% (except for batteries). The request, therefore, is for levying a uniform 5% GST on all EV spare parts.

In addition, as we all have to presently import lithium-ion cells and I would request that the government reviews and negates the customer duty on Li-ion cells to 0% until we have localised cell manufacturing in India.

Should the government’s EV-centric FAME subsidy be extended beyond 2024?
The new FAME-II scheme should be linked to electric mobility conversion rather than being time-based. According to market trends, the electric two-wheeler segment has the potential to continue its growth momentum, once it reaches 20% of the total 2W market. The subsidy can be tapered off thereafter. Also, the FAME-II scheme should have provisions to directly transfer the subsidy to the customers.

The Auto Expo 2023 saw new launches in the e-LCV, trucks, and heavy commercial vehicle segments as well. How can the Budget give a fillip to these categories?
I will say that the finance minister should increase the scope of FAME to include commercial vehicles on a project-mode basis. Today, trucks account for over 40% of India’s fuel consumption and over 40% of the greenhouse gas emissions across the road transportation sector.

The agricultural sector is also waiting for disruption from EVs much like two- and three-wheelers. I would urge the FM to expand the FAME subsidy to electric tractors to help India cut down on its fuel-import bill as well as carbon emissions.

In addition, the government must allocate special funds and advise the agriculture ministry to announce exclusive provisions for incentivising e-tractor buyers in the sub-mission on agricultural mechanisation (SMAM) guidelines and allocate state-wise yearly targets for electric tractors.

EV OEMs have been demanding support for battery R&D. What are your thoughts on the same?
India lacks R&D on battery storage for EVs, hence, the government can consider creating grants/incentives to stimulate innovation in this sector. We must also focus on skill development in a big way as the non-availability of skilled manpower for R&D, production, or repair can become a huge issue as EVs scale up. The government must allocate incentives for building academic or skill training courses particularly for EVs.

How can EV financing gain more traction in the financial ecosystem?
What you say is a given demand and this must be done. Another important step is to extend the guarantee being offered by NITI Aayog and the World Bank through SIDBI even for commercial four and six-wheelers.

Finance Minister should also help reduce the interest rate for loans taken by pure EV OEMs for setting up EV manufacturing facilities.

For EV penetration, a critical requirement is to enable a wide network of charging infrastructure. The government is required to provide a CAPEX subsidy of 50% for setting up charging infrastructure across the country.

What do you think about the PLI scheme and PLI Domestic Value Addition norms?
We are of the view that the production-linked incentive (PLI) scheme drafted is not designed for start-ups and MSMEs. I would request our finance minister to include MSMEs within the PLI ambit as they are struggling for capital and their wings must be strengthened by the government.

On the PLI Domestic Value Addition (DVA) norms, there is no clarity on the proposed DVA norms under PLI. DVA under FAME 2 was quite different than whatever we have heard under PLI DVA. Both FAME DVA and PLI DVA must be the same to avoid confusion, multiplicity, and complexity of implementation.

Experts have called for a consortium of Oil OMCs to install battery swap hubs at most fuel stations. What are your views on battery swapping and the steps the government should take to encourage swapping?
SMEV also recommends that a consortium of the four large oil and gas OMCs – IOCL, BPCL, MNGL & IGL - with a special corpus to install battery swapping stations at major fuel stations will give this category the much-needed impetus.

The battery swapping policy, which was announced in the last Budget, however, must be introduced soon. We would also recommend reduction in GST in swapping as it will lower the cost of EV ownership among fleet operators, and last-mile delivery companies.

Another worrying factor is that customers are charged 18% GST on every transaction that they undertake at an EV charging station and every battery swapped at a Battery Swapping Station. This must be reduced to 5% GST, which is the base level GST for EVs.

While corporate customers can take the input tax credit on the GST paid during this transaction, retail customers do not have such an option and they absorb the tax as a cost. I would urge the FM to extend the FAME-II incentives for extra or float batteries for battery swapping as per the draft EV policy which mentions that.

Do you think tax rebates should be extended for R&D in lithium-ion battery recycling?
Certainly, for research & development expenses related to battery recycling, a 200% tax rebate, as before, may be considered. But more importantly, we urgently need a policy on Li-ion battery recycling as its five years now that various companies have set up facilities and the government guidelines on recycling should be implemented with immediate effect. I will also say recycling agencies must be recruited by the government with a tender issued for agency recruitment.