Car cos put on a brave face Budget proposals to impact growth of life insurers
The motor show is now open for general public till February 12
The second day of the 15th edition of the Auto Expo, India’s biggest motor show at Greater Noida, continued with its somber mood with plummeting sales in a slowing economy hitting the industry hard even as automakers tried to put up a brave face with launches and unveils of cars and two-wheelers to drum up excitement and buzz in the market.
Market leader Maruti Suzuki, which will not introduce its electric car in the near future, on Thursday unveiled the all new powerful and stylish Vitara Brezza BS6 Petrol compact SUV. The latest version offers an enhanced sportiness, bolder looks, stronger stance, and premium interiors and comfort.
Launched in 2016, the Vitara Brezza became an instant hit as it took the market by storm, emerging as the most awarded compact SUV. Its dominance over the segment is evident from the fact that in less than four years of its launch the Vitara Brezza has sold over five lakh units.
The car is powered by the 1.5-litre petrol engine, which replaced the 1.3-litre diesel as part of Maruti’s larger plan to withdraw diesels from its line-up by April 1, 2020.
The carmaker will launch and announce prices for the refreshed Vitara Brezza in a couple of weeks. Variants with the 5-speed manual are rated at 17 kmpl while the automatic, with the mild-hybrid tech, has an ARAI rated 18.76 kmpl.
Mercedes-Benz, India’s biggest luxury car maker, launched its V-Class Marco Polo, the latest luxury MPV range. The Marco Polo has been priced at `1.38 crore at pan-India showroom, which means it sits at the top of the V-Class range, even above the V-Class Elite variant priced at `1.10 crore.
The two variants of the VClass Marco Polo are the Marco Polo Horizon and the Marco Polo, priced at `1.38 crore and `1.46 crore respectively. “The V-Class and V-Class Elite pioneered the luxury MPV segment in India and has witnessed much success ever since their launch,” Martin Schwenk, MD and CEO at Mercedes-Benz India, said.
He said Mercedes was now expanding this segment with the launch of the Marco Polo, based on the VClass. “It create a new benchmark in the luxury MPV segment and the compact dimensions of the Marco Polo and vehicle technology inherited from the VClass, the Marco Polo and Marco Polo Horizon are suitable for long journeys and at the same time for dayto-day and urban usage,” Schwenk boasted.
The Marco Polo combines functionality with utmost luxury, unparalleled comfort, convenience, and uncompromised safety.
Mercedes-Benz also unveiled the future of mobility the unique Volocopter, which aims to offer affordable on-demand air taxi services and save people time by flying them safely to their destination.
At present, the company is striving for commercial certification through the European Aviation Safety Authority and expects to open the first commercial routes within two to four years.
Korean brand Hyundai, India’s second biggest car maker, took off the covers of the India-specific, second-generation Creta SUV on Thursday. Revealed as the new-generation ix25 in China last year, the new
Creta not only comes with revamped exterior and interiors but will also come with a new BS6-compliant engine line-up.
Hyundai will reveal the Creta’s interior and more details closer to its launch in mid-March 2020. It is likely to be priced in the `10-16 lakh range.
The original Creta not only defined what a midsize SUV ought to be but also dominated the segment for much of its life. This all-new Creta will take the legacy of Hyundai brand forward.
Volkswagen is in the
A model poses for photographs with the newly launched Piaggio SXR 160 twowheeler and the Vespa refresh at the Auto Expo 2020, in Greater Noida on Thursday
midst of a massive transition towards electrification globally. At the Auto Expo 2020, the German brand gave a glimpse of what is to come with the I.D. Crozz electric SUV concept, the production version of which Volkswagen intends to launch in India by 2021.
The I.D. Crozz employs an 83kWh lithium-ion battery, which powers a 102hp/ 140Nm electric motor at the front, and a 204hp/310Nm electric motor at the rear, resulting in a combined output of 306hp and 450Nm of torque. Volkswagen said the I.D. Crozz has a range of
The government’s move to withdraw dividend distribution tax (DDT) and transfer the tax liability of dividend income to investors will impact the margins and the valuations of life insurance companies.
According to analysts, the net impact of the change will range from 50 basis to 200 basis points on the margins and upto 5 per cent on the valuations. Another blow to life insurers will also come from withdrawal of Section 80C deduction for assessees that opt for the new tax regime.
The Union Budget introduced a new optional personal tax regime and removed dividend distribution tax. These changes are likely to impact both demand and margins for life insurance products.
Analysts have cut the individual new business growth assumptions for FY21 estimates and valuations of life insurers.
Insurers till now enjoyed tax benefit on dividend income received on investments, and thus their effective tax rate was lower than the corporate tax rate. The Budget abolished the DDT and makes dividend taxable in the hands of the recipient. However, this will partly be offset by new section 80 M which allows insurers to take the benefit of dividend on investments received by them (up to the extent of dividend distributed by them to their shareholders).
Jefferies India in its report said, “As per HDFC Life, the net impact of the (DDT) change will be around 80 basis points on the value of the new business margins and around one per cent on the embedded value. As per Max Life, they will have around one to 1.5 per cent impact on embedded value and around 50-80 basis points margin impact. The impact for ICICI Prudential could be slightly more given its higher mix of ULIPs. SBI Life reports numbers in both methods (without using Section 80M benefit through), where margin difference in 200 basis points and the embedded value impact is 5 per cent between two methods (numbers are provisional, exact numbers will be reported in 4Q).”
Madhukar Ladha, Analyst, HDFC Securities said, “Our calculations suggest that individuals with income in the range of `7 to 15 lakh will have lower propensity to invest as the tax savings on incremental investment is in the range of around 19-30 per cent. Additionally, individuals within this lower income range may prefer a higher disposable income as against higher tax savings. We expect individuals earning higher than `15 lakh to continue to prefer using deductions/exemptions as tax reduction on incremental savings is 43.2 per cent (for income of Rs 22 lakh). While it is difficult to quantify the impact of this on demand we have cut our FY21E APE estimate between 1.7-5.8 per cent for all companies.”
On abolishing of DDT, Ladha said, “While the Budget abolishes DDT and makes dividend taxable in the hands of the recipient, it allows for deduction of dividend paid by the company to its shareholders thus providing some relief to companies. Our calculations suggest that this move reduces FY21 estimated value of new business margins of insurers by upto 70 basis points. We expect HDFC LIFE’s margin to be most impacted by 70 basis points, while MAX Life’s margins are not likely to get impacted at all.”