Sectoral Impact of Budget 2013-Xlri Student Fund
Sectoral Impact of Budget 2013
Prepared by XLRI Student Fund
Vignesh Shanker Himank Jain Ashish Choudary Piyush Jhawar Abhas Gupta Sairam Guthena
1
I) Impact of Budget 2013 on the Auto Sector
Despite an increase in excise duty on utility vehicles (UV) to 30% from 27% (with duty on UV taxis, contributing to significant proportion of sales, remaining unchanged), the overall sales in this category are not likely to be materially impacted.
The Union Budget 2013-14 is likely to have a minimal impact on the domestic auto sector, considering that excise duties have remained largely unchanged, and macro-economic parameters continue to weigh down sales. With excise duty for most categories remaining unchanged at 12%, and given the high interest rates and increasing diesel prices, passenger car and van sales growth will be in line with expectation of 2%-3% and 0.5%-1.5%.
Despite an increase in excise duty on utility vehicles (UV) to 30% from 27% (with duty on UV taxis, contributing to significant proportion of sales, remaining unchanged), the overall sales in this category are not likely to be materially impacted. Increase in prices in the mid-to-topend UV segments would not be a deterrent for high net worth individuals as well as corporates. Competitively priced low-end UV models would continue to contribute to the bulk of segment sales, as their prices are comparable to mid-size cars.
The increase in customs duty on imported luxury cars to 100% from 75% would channelize the demand towards locally assembled luxury models and be positive for the domestic industry.
2
The proposal to allocate INR148, 730m towards Jawaharlal Nehru National Urban Renewal Mission (JNNURM) (a part which is meant to acquire 10,000 buses in largely hilly areas) would help prop up sales volumes of Medium and Heavy Commercial Vehicles (MHCV) passenger carriers to some extent. MHCV manufacturers and bus body builders would benefit from government purchase of fully built
Prepared by XLRI Student Fund
Vignesh Shanker Himank Jain Ashish Choudary Piyush Jhawar Abhas Gupta Sairam Guthena
1
I) Impact of Budget 2013 on the Auto Sector
Despite an increase in excise duty on utility vehicles (UV) to 30% from 27% (with duty on UV taxis, contributing to significant proportion of sales, remaining unchanged), the overall sales in this category are not likely to be materially impacted.
The Union Budget 2013-14 is likely to have a minimal impact on the domestic auto sector, considering that excise duties have remained largely unchanged, and macro-economic parameters continue to weigh down sales. With excise duty for most categories remaining unchanged at 12%, and given the high interest rates and increasing diesel prices, passenger car and van sales growth will be in line with expectation of 2%-3% and 0.5%-1.5%.
Despite an increase in excise duty on utility vehicles (UV) to 30% from 27% (with duty on UV taxis, contributing to significant proportion of sales, remaining unchanged), the overall sales in this category are not likely to be materially impacted. Increase in prices in the mid-to-topend UV segments would not be a deterrent for high net worth individuals as well as corporates. Competitively priced low-end UV models would continue to contribute to the bulk of segment sales, as their prices are comparable to mid-size cars.
The increase in customs duty on imported luxury cars to 100% from 75% would channelize the demand towards locally assembled luxury models and be positive for the domestic industry.
2
The proposal to allocate INR148, 730m towards Jawaharlal Nehru National Urban Renewal Mission (JNNURM) (a part which is meant to acquire 10,000 buses in largely hilly areas) would help prop up sales volumes of Medium and Heavy Commercial Vehicles (MHCV) passenger carriers to some extent. MHCV manufacturers and bus body builders would benefit from government purchase of fully built