Carbike360 Forecast: Key Insights into the Auto Industry's Outlook for Budget 2024

Key Highlights

• Auto industry, contributing 7.1% to India's GDP, sees Union Budget 2023-24 as growth-oriented for Atmanirbhar Bharat.
• FYI 22-23: EV market surges, Tata and Toyota lead, and 4 million mass-market vehicles sold.
• Union Budget 2023-24: Focus on net zero carbon, hydrogen economy, and EV support with reduced customs duties.
• Auto Industry's Outlook 2024 anticipates impacts: EV incentives, infrastructure development, interest rate cuts, and holistic measures for sustained growth.

Overview

We all are excited for this Upcoming Union Budget 2024-25 on February 1st, 2024. There are three most crucial sectors where we all have eyes on Infrastructure, Healthcare and Education. But have you ever thought the entire development relies on mobility and transportation. That’s why our Automotive industry plays an important role in the country's progress. 

So now we will look at the Union Budget that has been allocated in 2023-24 and  what we can expect in 2024-25. But before that let’s see the vehicle sales data comparison between FYI22 and FYI23.

Vehicle Sales in FYI 22-23

In the dynamic landscape of the electric vehicle market in 2023, a total of 92,344 Battery Electric Vehicles (BEVs) and 82,606 Hybrid Electric Vehicles (HEVs) found their way into the hands of consumers. Impressively, BEVs and HEVs accounted for 2.3% and 2% of total Passenger Vehicle (PV) sales, respectively.

While the BEV segment faced a declining trend in the latter half of 2023, Tata and Toyota maintained their stronghold, commanding 72% and 78% of the BEV and strong-hybrid EV markets, respectively. Notably, the Tata Tiago EV emerged as the best-selling BEV, while the Toyota Innova Hycross claimed the top spot among strong-hybrid EVs.

In other industry milestones, the Indian mass-market passenger vehicle sector celebrated a monumental achievement by surpassing the 4 million-unit mark.

The industry witnessed record-breaking yearly sales, reaching an impressive 41,00,258 vehicles in CY2023. The monthly average volume for the year stood at 3,41,688, with October 2023 standing out as the best sales month in history, recording 3,91,066 vehicle sales.

One of the key driving forces behind this success was the robust demand for SUVs and crossover body-style products, reflecting the evolving preferences of the discerning consumer base.

Union Budget 2023-24 

The Union Budget for the fiscal year 2023-24 had several significant allocations and policy decisions for the automotive industry. 

Here are some key highlights:

Net Zero Carbon

An outlay of INR 35,000 crore was announced for energy transition, focusing on achieving India’s goal of net zero carbon emissions by 2070.

Hydrogen Economy

To facilitate the transition to a low carbon intensity economy, an outlay of INR 19,700 crores was announced for the National Green Hydrogen Mission. The government is aiming to reach an annual production of 5 metric million tonnes by 2030. 

Electric Vehicles (EVs)

The customs duty was reduced from 21% to 13% on lithium-ion cells, and subsidies on EV batteries were extended for another year. Viability gap funding support for battery storage systems with a capacity of 4,000 MWh was also announced.

Scrappage Policy

Adequate funds were allocated to scrap old vehicles of the central government, and states were also supported in replacing old vehicles, including ambulances.

Transport Infrastructure Projects

100 critical transport infrastructure projects were identified for last and first-mile connectivity for ports, coal, steel, fertiliser, and food grain sectors, with an investment of INR 75,000 crores, including INR 15,000 crore from the private sector.

MSMEs

A corpus of INR 9,000-crore was announced for a revamped credit guarantee scheme for micro, small, and medium enterprises (MSMEs), effective from April 1, 2023.
The automotive industry, contributing about 7.1% to India’s GDP and generating significant direct and indirect employment, termed the budget as growth-oriented. The budget proposals were expected to accelerate domestic manufacturing and help fulfil the vision of Atmanirbhar Bharat. 

As for the achievements, the specific details are not available in the search results. However, the budget was expected to drive sustainable yet inclusive growth at a rapid pace. Although we have seen a lot of initiatives, foreign and Indian big names in the industry to invest in Green energy. 

Auto Industry's Outlook for Budget 2024

The Indian government's budget for 2024 could play a crucial role in influencing the factors mentioned earlier and thereby contribute to the growth and stability of the automotive industry.

Here are some potential ways the budget could impact the auto sector:

1. Incentives for Electric Vehicles (EVs)
  
The budget may introduce or enhance incentives for electric vehicles, such as tax breaks for manufacturers and consumers, subsidies, and infrastructure development for EV charging stations. This would encourage the adoption of eco-friendly vehicles and contribute to the growth of the electric vehicle industry.

2. Infrastructure Development
  
Increased allocations for infrastructure development, particularly in the transportation sector, can positively impact the automotive industry. Investments in road and highway development can enhance connectivity and improve the overall transportation ecosystem.

3. Reducing Interest Rates
  
The budget might include measures to stimulate economic growth, including potential reductions in interest rates. Lower interest rates can make auto loans more affordable, boosting consumer confidence and increasing the demand for vehicles.

4. Tax Incentives for Manufacturers
  
Providing tax incentives or subsidies for automotive manufacturers can encourage investment in research and development, leading to the production of more cost-effective and technologically advanced vehicles.

5. Promoting Sustainable Practices
  
The government could introduce policies that promote sustainable practices within the automotive industry. This might include incentives for adopting green manufacturing processes, recycling initiatives, and eco-friendly technologies.

6. Customs Duties and Import Policies
  
Adjustments to customs duties and import policies can impact the cost of raw materials and components. The budget might address these aspects to ensure a competitive and stable cost structure for the automotive sector.

7. Encouraging Public Transportation
  
The budget could focus on promoting public transportation through investments in metro rail projects, bus rapid transit systems, and other mass transit initiatives. This could reduce congestion, lower pollution levels, and influence consumer preferences.

8. Research and Development (R&D) Support
  
Increased funding for R&D initiatives within the automotive sector can lead to innovations, improved fuel efficiency, and the development of new technologies. This, in turn, can enhance the competitiveness of the industry.

9. Promoting Digitalization and Connectivity
  
The budget might include provisions for promoting digitalization and connectivity within vehicles. This could involve investments in smart infrastructure, IoT technologies, and connected vehicle ecosystems.

10. Incentives for Foreign Investments
   
Offering incentives for foreign automotive companies to invest in India can contribute to job creation, technology transfer, and overall industry growth. This might involve tax breaks and streamlined regulatory processes.

11. Fiscal Measures for Economic Stability
  
Implementing fiscal measures to ensure economic stability, including managing inflation and controlling fiscal deficits, can create a conducive environment for sustained demand in the automotive sector.

It's important to note that the effectiveness of these measures depends on their implementation and the dynamic nature of the economy. The budget should aim to strike a balance between promoting growth and ensuring fiscal responsibility to create a sustainable and resilient automotive industry in India.

Verdict

The Union Budget 2023-24 is presented with a focus on sustainability, including initiatives like the Net Zero Carbon goal, the Hydrogen Economy, and support for Electric Vehicles (EVs) through reduced customs duties and extended subsidies. The Scrappage Policy, investments in transport infrastructure projects, and support for MSMEs are also outlined.

Looking ahead to the Auto Industry's Outlook for Budget 2024, the content provides potential ways in which the budget could impact the sector. It discusses incentives for EVs, infrastructure development, interest rates, tax incentives for manufacturers, sustainable practices, customs duties, public transportation promotion, R&D support, digitalization, incentives for foreign investments, and fiscal measures for economic stability.