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    Budget 2020: Impact on the auto industry

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    Nikhil Puthran

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    Budget 2020: Impact on the auto industry

    - GST for ICE-powered vehicles continues to be 28 per cent 

    - Electric CBU and CKD vehicles to cost more  

    - Localisation a priority and the government to provide ‘handholding support’ 

    The Budget 2020 has limited benefits for the Indian automotive. Most expectations of the automotive manufacturers and related companies remained unmet. The automobile industry had been looking forward to reduction in GST in order to compensate for the hike in prices during the BS6 transition, while lithium-ion battery manufacturers expected a five per cent reduction in custom duty. However, the Indian government has announced ‘handholding support’ for the Indian automotive component industry for technology upgradations, research and development and business strategy planning.  

    The Budget 2020 focuses more on localisation. Effective from 1 April 2020, custom duty on completely built units (CBUs) of commercial EVs will be increased to 40 per cent as against the current custom duty of 25 per cent. As for passenger EVs, the finance minister has proposed to surge customs duty on semi knocked down (SKD) to 30 per cent as against the currently applicable 25 per cent. Additionally, the government has also proposed hiking the duty on SKD forms of electric buses, two-wheelers and trucks to 25 per cent as against the current custom duty of 15 per cent.

      The government has however introduced a new scheme to promote electronics, semi-conductor manufacturing and assembly to attract foreign investment in the country. It is believed that the initiative will help with EV manufacturing in the country. As revealed by the finance minister, a scheme of Rs 1,000 crore will be anchored in the Exim bank together with SIDBI and both these institutions will contribute Rs 50 crore each and it will be achieved towards equity and technical assistance. Additionally, debt-funding of Rs 900 crore from banks would also be made available.   

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