Union Budget 2024: SIAM expects continuation of EV incentives, higher capex in first NDA 3.0 budget

Union Budget 2024: The Society of Indian Automobile Manufacturers is expecting a continuation of incentives for electric vehicles such as FAME (Faster Adoption for Manufacturing of Hybrids and Electric Vehicles) and a focus on the allocation of more capital expenditure in the upcoming budget.

According to Vinod Aggarwal, President, of SIAM, the government should continue initiatives that are good for the economy. "We are expecting that it will be a growth-oriented budget again. By growth-oriented budget means that there will be more focus on the capital expenditure because capital expenditure also has a multiplier effect on all segments of the economy for economic growth," Aggarwal told reporters at a press conference on Friday, adding that the auto sector will continue growing if the economy grows. Aggarwal also expects incentives to boost the rural economy in order to drive growth in auto, FMCG and other segments.

Meanwhile, the Automobile Manufacturers Association expects the introduction of FAME-III in the upcoming budget. Aggarwal observes that despite recent declines in electric vehicle (EV) sales, the implementation of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme, specifically FAME-III, will likely spur a resurgence in EV sales.

"We are expecting that the government will come out with some new policy on the incentives in this coming budget. I'm sure based on that this (EV) industry will start picking up. Because at the same time, if you look at the electric vehicle, the acquisition cost is high. So they still need some incentives for momentum," says Aggarwal.

SIAM also expects some incentives for the scrappage of vehicles in the upcoming budget.

When asked about the rising inventory level, which has been a concern amongst dealers for quite some time, Aggarwal says that he expects automakers to work alongside dealers to reduce the stocks level.

"Over some time, the inventory is not a concern because, at the end of the day, the whole sales have to be equal to the retails. So, therefore, we don't see as the whole inventory as a concern. But of course, if there are any particular dealers who are having high stocks I am sure they will correct themselves in the coming months," notes Aggarwal.

Notably, in the April to June quarter of FY25, the passenger vehicle sales increased by 3% to 10,26,006 units as against 9,96,565 units in the same period last year. Of this, utility sales accounted for 63% of total sales witnessing a growth of 18% during the quarter under review to 6,45,794 units, as against 5,47,194 units in the same period last year. The small car sales declined by 17.5% to 3,41,293 units as against 4,31,723 units in Q1 of FY23. According to Aggarwal, he expects a decline in small car segment sales to continue as consumers are migrating from small cars to utility vehicles.

Meanwhile, after a slump of three consecutive quarters, the auto exports across all segments surged by 15.5% in the June quarter of FY25 to 11,92,567 units, as against 10,32,449 units in the same period last year. "I think that's a very good sign that the exports seem to have bottomed out especially the in the commercial vehicles, which have been worst impacted. So, therefore, we have started seeing growth in exports from Q1 this year. Till last year, there was a huge drop in the trucks and vessels for exports. But this year quarter one has been good and it has been good even in the other segments like two-wheelers and passenger cars. So, therefore, we are very positive that the exports have started recovering," says Aggarwal.