The automobile industry Monday appreciated Finance Minister Pranab Mukherjee for

not changing excise duty rates and welcomed the tax concessions for
environment friendly vehicles.
"It is a neutral budget for the auto sector. We had expected a hike in the excis
e duty rates. The tax sops given for electric and hybrid vehicles are
a move in the right direction. However necessary infrastructure should be there
for these technologies to gain ground," Y.V.S. Vijay Kumar, executive
vice president and business head, Hindustan Motors said.
An industry analyst, preferring anonymity, said: "The tax sops given to the elec
tric vehicles will not make any major impact. It will be for small
segment of vehicle."
While presenting the budget for 2011-12 in the Lok Sabha, Mukherjee said: "The I
ndian automobile market is the second fastest growing in the world
and has shown nearly 30 per cent growth this year.
"World over, substantial investments are being made in the field of hybrid and e
lectric mobility. To provide green and clean transportation for the
masses, National Mission for Hybrid and Electric Vehicles will be launched in co
llaboration with all stakeholders."
In order to popularise electric vehicles, Mukherjee proposed full exemption from
basic customs duty and a concessional rate of central excise duty
of four per cent on batteries imported by manufacturers for the replacement mar
ket.
This is expected to reduce the battery cost when an electric vehicle user goes f
or replacement of his old battery.
"Fuel cell or hydrogen cell technology is a promising green technology for the a
utomobile sector. I propose to extend the concessional excise duty
of 10 per cent to vehicles based on this technology," Mukherjee said.
He also said full exemption from basic customs duty and special countervailing d
uty on specified parts of hybrid vehicles will be given while reducing
the excise duty to five per cent from the current 10 per cent to encourage domes
tic production.
Mukherjee also proposed to reduce the excise duty to five per cent on manufactur
e of kits for converting fossil fuel vehicles to hybrid vehicles.
While scrapping the refund-based excise duty for factory-built ambulances and of
fering the tax concession outright, Mukherjee extended the refund-based
excise duty concession for taxis with a seating capacity up to 13 people includi
ng the driver.
According to Angel Broking , a stock broking firm, the broader measures like inc
reased focus on rural and infrastructure spending would support long-term
growth of the auto sector

Overall, the Union Budget 2011-12 is positive for the Automobile sector as the c
entral excise duty has been kept unchanged. Further,
special incentives has been announced for companies manufacturing hybrid vehicl
es in India. Moreover, broader measures like increased
focus on rural and infrastructure spending would support long term growth of the
sector.

ndia s automotive sector has some positives to take from the budget announced toda
y by India s Finance Minister Pranab Mukherjee. Contrary to the expectation of an
increase in excise duty the Finance minister spared it from any change. The move
would be a certain welcome by the industry as it is already fighting rising inp
ut costs. Hopefully now we might not witness a significant increase in car price
s in the short-term. The announcement has also boosted the market sentiment and
has been well-received.
Another announcement to benefit carmakers and auto component suppliers is the re
duction of custom duty on raw steel. With steel prices going down the industry w
ill benefit from strengthening margin lines as it will become cheaper to source
finished steel from tier 2 & 3 suppliers.
Green cars & technology received a shot in the arm from the Finance Minister as
he announced a National Mission for hybrid & electric vehicles to promote their
adoption as well as incentivise them. Going forward critical parts/assemblies re
quired to manufacture hybrid vehicles would be granted exemption from the basic
custom duty of 10% and special CVD. A concessional rate of 5% excise duty will b
e granted to hybrid vehicles if manufactured locally. In addition, the excise du
ty on kits used for conversion of fossil fuel vehicles into hybrid vehicles has
been reduced from 10% to 5%, thereby making them cheaper. Technology for such ki
ts has been developed indigenously and the move will not only promote adoption b
y customers but will also help the R&D for such technologies.
Full exemption from basic customs duty and a concessional rate of Central Excise
duty of 4 per cent was provided to specified parts of electrical vehicles in th
e last Budget on actual-user basis. The concession has now been extended to batt
eries imported by manufacturers for the replacement market as well. Hydrogen/Fue
l cell technology is still far from mass usage but the focus on such future tech
nologies was visible in the budget. Such vehicles will now enjoy a concessional
excise duty of 10%.
The Central Excise duty on LED lights was reduced from 8% to 4% in last year s bud
get but the LED material still attracts an excise duty of 10% and a special CVD
of four percent. This duty has now been reduced to 5% with the special CVD fully
exempted.
In a nutshell, the budget has helped in the creation of a growth-conducive envir
onment for the Indian automotive industry. Apart from not increasing the excise
duty rates and hence not making cars more expensive the budget will also help th
e manufacturers, especially SMEs to improve their profitability due to reduction
of excise duty for raw steel. The focus on green technology along with promotin
g their adoption is also a welcome move and even though the effects might not be
visible right now a continued focus on the sector will ensure growth in the med
ium and long-term.