Budget 2021-22 wishlist: Here are the key challenges in automotive sector

Currently this sector is in severe stress with high NPAs and availability of funding
Key challenges


Sustained recovery of market demand: The market has shown green shoots of recovery with high growth in Q3FY21.


Timely revival of the NBFC sector: The sector accounts for a major share of the retail financing and is key to driving sales in the commercial vehicle segment. Currently this sector is in severe stress with high NPAs and availability of funding


Commercial vehicle industry: The sector and its supply chain has a longer road to revival


Industry ask


  • GST cut: Reduce tax from 28% to 18% for 1 year
  • Vehicle scrappage policy: An incentive-based policy to scrap over 15-year-old commercial vehicles and revised axle norms needed 
  • Infra projects: Prioritise infra projects eg. NHAI, irrigation etc., under the fiscal spend initiatives
  • Accelerated depreciation for vehicles:  Introduce a one-time accelerated depreciation for new vehicles purchased in FY22
  • Promote localisation: Support needed in the sourcing of automotive components
  • EV incentives: A one-year relaxation in the FAME II policy conditions to include incentives for personal vehicle buyers (non-transport) and increase per kWh incentive for two-wheelers
  • Transfer pricing: Provide relaxation/ flexibility in transfer pricing (arm’s length pricing) norms, in line with the OECD’s recommendation, for firms which have faced significant challenges

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