The Union Budget 2018, announced by finance minister Arun Jaitley on 1 February, is going to benefit the Indian automotive components sector.
The government’s decision to hike customs duty on certain auto parts is going to promote Make in India initiative, thereby generating employment in the industry.
Subrata Ray, Senior Vice President and Group Head, Corporate ratings, ICRA said the impact of the Budget 2018 on the components sector will be positive.
“The hike in customs duty on select auto components namely spark-ignition and compression-ignition internal combustion engines, and its sub-components (crankshafts, pistons, piston rings, sparkling plugs, fuel nozzles, among others) and several other auto-components like bumpers, safety seat belts and airbags, mounted brake linings, radiators, shock absorbers, drive and non-drive axles, radiators and wheels; including several components used in two-wheelers (including cycles) is a strong positive for domestic auto component manufacturers and will promote made-in-India.”
“The government’s increased outlay for the rural and agrarian segment would lead to higher disposable incomes and demand for the automotive sector especially in two-wheeler, passenger vehicle and tractor; these together account for 70 per cent of domestic original equipment demand for components.”
“Considering the prevalence of MSMEs in the auto component value chain (tier II and III suppliers), the reduction in corporate tax rates (for companies with turnover
Manav Kapur, Executive Director of Steelbird International, reiterated the same thing by saying “The decision to impose a higher customs duty on auto parts, accessories & CKD components is a good step. This initiative reaffirms that the government is in sync with Make in India mission.”
“It will act as a significant potential for domestic value addition within the auto components sector.”
Dharmesh Arora, CEO of Schaeffler India, while applauding Budget as a balanced one said the announcements “are expected to create a positive effect with respect to demand, generate employment and boost investments in the private sector.”
However, he was quick to mention that “While the budget has refrained from providing any direction to the country’s automotive sector, we are hopeful that the impending electric vehicle policy will provide clarity. On the whole, we expect Budget 2018 to create a positive investment climate.”
Yevgen Sokolnikov, the CEO and co-founder of boodmo, an auto component marketplace startup company, thinks the marketplace will benefit with continued focus on digital transactions and ease of doing business.
“I am happy to note that India is giving special attention and treatment to medium and small enterprises, which is said to have been due for long. I expect that businesses like ours having technology interface, will gain owing to the country’s renewed focus on digital transactions and ease of doing business.”