Roll back of excise sops drive domestic sales in December, but industry expects a slowdown in the coming months
Sai Nikesh D
Automobile exports in India grew by 20.75% in between April and December 2014 over the same period in 2013, according to the Society of Indian Automobile Manufacturers (SIAM).
Exports of two-wheelers recorded the highest growth of around 25.26% followed by three-wheelers (20.56%), commercial vehicles (14.58%) and passenger vehicles (6.21%). SIAM said that the threat of excise rollback in the month of January boosted the vehicle sales in December, 2014.
In June 2014, the new government had extended the duty concessions by six months to December 31, 2014. The excise duty on small cars, scooters, motorcycles and commercial vehicles was reduced between 4-6%. However, the government decided to discontinue the sops this month.
SIAM said that while lower oil prices and a recovery in economy is likely to help sales, the impact of the roll back of excise duty sops will be felt in the coming months. The Associated Chambers of Commerce & Industry of India (ASSOCHAM) has said that higher excise duty can be disastrous for India’s auto industry. “To the extent, the government seeks higher duty, the sales volume will drop beyond that… it would thus be a counter-productive move even from the taxation point of view,” D.S. Rawat, Secretary General, ASSOCHAM has said.
However, the industry is hopeful of a recovery soon. Earlier, the Automotive Component Manufacturers Association of India (ACMA) said that the worst is probably over and passenger car sales have grown by decent rates in the key USA and EU markets since May 2014, signs that give a sense of optimism for the year ahead.
India is the world’s seventh-largest automobile producer in the world, producing around 17.5 million vehicles per year, of which around 2.3 million are exported. The sector accounts for almost 7% of India’s GDP and employs about 19 million people.
This article was published in The Dollar Business on January 10, 2015.