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Two/Three Wheeler industry: Goes unnoticed but will gain

Last updated on: March 01, 2013 11:21 IST

Two/Three Wheeler: Budget Analysis 2013-14

Budget Provisions

Basic customs duty on motorcycle with engine capacity of 800cc or more being increased from 60% to 75%.

Investment allowance of 15% for investments above Rs 100 Cr as a tax incentive.

Financial Year 2013-14 expenditure plan will be 30% higher than FY 2012-13 with total expenditure to be 5.5 Lakh Crores. Focus on Infrastructure, Agriculture and Road Projects

Setting up of a regulatory authority for roads, target of 3000 km of project award in first half of FY14.

Encouraging Infrastructure Debt funds would provide a scheme for take out financing, credit enhancement by IIFCL 

Tax-free bonds up to Rs 50,000 crore will be allowed in the new financial year.

Proposal to provide an additional deduction of interest of up to Rs 1 lakh on housing loans of up to Rs 25 lakh for the first time buyers in addition to the current exemption of Rs 1.5 lakh.

Tax Concession on spare parts of environment friendly vehicles extended till Mar '15

DTC Implementation deferred.

The development on the GST front. The finance minister indicated that there has been some consensus that has emerged on the issue and that it will get passed in the near future

Rs 2000 tax credit for people earning between Rs 2 lakh and Rs 5 lakh.

No change in income tax rate slabs

Industry Expectation

With the need to grow at a much faster clip, the industry demanded excise duties to be brought to previous levels and policy stimulus. ie at levels of 10% or 22%.

Seeking an excise duty structure as stated in the auto policy and the 10-year Auto Mission Plan (AMP).

Asked for a concessional excise duty structure -- an equivalent GST to be applicable at 10% flat across all segments such as cars, two-wheelers and commercial vehicles.

Concrete announcement regarding roll-out of GST

Boost in infrastructure industry. MAT tax to be lowered/ abolished for infrastructure players. 

Creation of long term dedicated debt funds for infrastructure.

Priority sector lending status for infrastructure sector funding. The move will ease the cost of funding for the infrastructure sector.

Reintroduce tax saving infrastructure bonds.

Budget Impact

Increase in basic customs duty on motorcycle with engine capacity of 800cc or more being increased from 60% to 75% will increase the cost of imported motorcycles.

That will not have much of an impact on the domestic two/three wheeler industry as most of the sales occur in the 
The positive aspect is that it will lead to higher levels of localization and reduce the import of CBUs.

The industry is going to benefit from the high demand arising out of the boost given to the infrastructure activities. People buying houses will get an additional deduction of Rs 100,000 rupees on interest payments on their first home loan of up to Rs 25 lakh. This will increase the disposable income in the hands of common man.

Parts for electric and Hybrid powered vehicles will undergo tax breaks until 2015 which is quite evident in terms of the Government favoring Green technology and also adds to the focus on higher fuel efficient vehicles for the domestic market.

Stock to watch

HHML, BA, TVS, Atul Auto

Outlook

The 2013-14 Budget continues to focus on growth in predominantly primary sectors like agriculture, infrastructure and education. This growth will in turn support the growth in other sectors including the automobile industry.

Large road projects and facilities to first time home buyers, both in urban and rural areas, will benefit the sector. Rural stimuli has been continued which is good for the sector. The sector is extremely sensitive to interest rates and more such cuts, which have already started, are expected in the near future.

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Union Budget, as it unfolded on February 28

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