Budget 2021-22: Some hope for auto sector, if not complete relief

The auto industry is still recovering from adverse effects of the pandemic, and it is anybody's best guess as to how 2021 will shape out. However, going by the strong recovery in sales, and the positive sentiment amongst industry players, we believe that the worst is behind us and it's only going to get better hereon. For the auto industry: the 2021 budget brings with it some hope, if not complete relief.

The Government’s move to ramp up spending (to nearly Rs 2 lakh crore) in production-linked incentive schemes is a good start. This is likely to draw in more global players to an already lucrative Indian automotive market, strengthening the Government’s ‘Vocal For Local’ cause. We have seen manufacturers like Kia Motors, Morris Garages and Citroen make in-roads over the past couple of years, and have global electric vehicle behemoth

Tesla setting base as well.

With the voluntary vehicle scrappage policy, we should see a revival in demand. The policy mandates fitness tests at automated centres for private vehicles that are 20 years of age. A levy of ‘green tax’ at the time of fitness renewal will dis-incentivise the use of older vehicles. Commercial vehicle manufacturers too stand to gain from the scrappage policy, where the limit for fitness is set at 15 years.

Going forward, the industry would love to see a roadmap on implementation of the policy and the monetary incentive a car buyer stands to gain by scrapping their old vehicles. Owing to the policy, we expect to see stronger demand for used cars which are well within the stipulated age.

Our wishlist for the budget included remedies for woes specific to the auto industry that remain unaddressed. Reduced taxes on new vehicles, and higher incentives for electric vehicles under the Government’s ‘Faster Adoption and Manufacturing of Electric Vehicles’ (FAME) policy would have helped bolster demand with more enthusiasm.

It’s just a matter of time before the automotive industry sees a holistic policy that fully addresses its needs and requirements. The 2021 budget seems to be a step in the right direction. With steady clear-sighted, pro-growth policies we should see the auto industry shoulder India’s metamorphosis into being truly self-reliant, or Atma Nirbhar.

The writer is founder and CEO of CarDekho Group

With steady clear-sighted, pro-growth policies we should see the auto industry shoulder India’s metamorphosis into being truly self-reliant, or Atma Nirbhar