fm nirmala sitharaman: Expect auto stocks to pick up speed if FM delivers these goodies in Budget

NEW DELHI: Investors and analysts in auto sector will keenly follow the forthcoming Budget and there are high expectations for unveiling of a scrappage policy, reduction in import duty on lithium cells and withdrawal or deferment of the proposal to increase vehicle registration fees from June 2020, among others.

Antique Stock Broking expects the government to introduce a scrappage policy, which will provide for setting up of authorised vehicle scrapping facilities. It expects the government to define end-of-life criteria for vehicle usage and fitness norms and incentivise vehicle owners for voluntary scrappage.

Emkay Global feels the implementation of an incentive-based scrappage policy could generate incrementally higher demand for companies such as Ashok Leyland and Tata Motors.

A reduction in import duty on lithium cells could increase affordability of electric vehicles and help stocks such as M&M, Tata Motors and Maruti Suzuki, it said.

At present, customs duty on lithium-ion battery cells stands at 5 per cent. Siam has proposed abolition of this levy. ICICIdirect expects players such as Exide Industries and M&M to gain if the duty is cut to nil.

Sharekhan said if implemented, such a step would encourage local manufacturing of battery packs and enable reduction in overall costs of electric vehicle.

This brokerage said any move to permanently withdraw the proposed increase in vehicle registration fee would prevent any further increase in cost of car ownership. “It would be sentimentally positive and will help demand recovery,” it said.

ICICI Bank said amid development of the national gas grid, the government can lay a roadmap to incentivise gas-based public transport vehicles, primarily buses. Investment on the lines of JNNURM in the past would help kickstart growth in the CV space

Emkay sees lower chances of any support to state transport undertakings for procurement of buses, which if the government does, should help Tata Motors and Ashok Leyland. It also sees little chance of income-tax benefits on the interest part of vehicle loans to individuals for purchasing alternative fuel vehicles.

There are also hopes of a cut in GST rate for two-wheelers and small cars to 18 per cent from 28 per cent at present. Meanwhile, a likely reduction in personal income-tax rates should help revive demand for discretionary spends such as vehicles.