“We have turned underweight in automobiles and have removed Ashok Leyland from model portfolio. We are now equal weight on M&M due to likely pressure on tractors, limited success of new SUV launches and higher exposure to diesel than other players," analysts at Prabhudas Lilladher said in their post-budget report.
The emphasis on electric vehicles supported by investments in creating infrastructure for the same is in contrast to the government's push in BSVI and current state of auto industry, the report said.
The government, under Union Budget 2019, pitched to make electric vehicle affordable to consumers and proposed to provide additional income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to purchase electric vehicles. This amounts to a benefit of around Rs 2.5 lakh over the loan period to the taxpayers who take loans to purchase such green vehicles.
Meanwhile, the demand across the automobile industry continued to remain subdued in June and witnessed a double-digit decline for the third consecutive month. Most of the original equipment manufacturers (OEMs) were forced to take production cuts in order to correct channel inventory.
Analysts at Reliance Securities expect the automobile industry to report muted volume performance in 1HFY20E, though it could improve in 3QFY20 with pre-buying ahead of BS-VI implementation. The brokerage firm expects marginal growth for FY20 across segments, while the industry is expected to witness cyclical downturn in FY21E.