Indian Autos FY12-13 Budget neutral for the Auto sector  HSBC Research,

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Indian Autos
FY12-13 Budget neutral for the Auto sector
 No increase in taxes on diesel cars, continued increase in rural
disbursements and modest increase in disposable income
(due to personal tax cut) are positives
 However, 2% increase in excise duty may negatively impact
demand modestly
 Overall, budget is unlikely to impact the auto demand outlook
materially
Key highlight of the Union budget 2012-13 was the increase in excise duty of nearly
200bps, but no increase (much anticipated) in tax on diesel cars. Excise duty for small
cars with an engine capacity below 1.2L for petrol and below 1.5L for diesel will increase
to 12% from 10%. The duty on large cars (length exceeding 4,000mm, engine capacity
under 1.2L for petrol and below 1.5L) increased from 22% to 24%. In the case of cars that
attracted a mixed rate (length exceeding 4,000mm and engine capacity exceeding 1.5L) of
duty of 22% + INR15,000 per vehicle will now be taxed at 27%.
Companies with high rural exposure such as Hero Motocorp, Maruti and Mahindra &
Mahindra should benefit from continued increase in rural disbursements (as shown in
Table 2 on the next page). HMCL may benefit modestly from the further expansion of tax
brackets for personal income tax. Separately, imports of completely built units of large
cars/SUVs/MUVs that cost above USD40,000 will be subject to customs duty of 75%
compared to 60% now. Tata Motors currently imports Jaguar and Land Rovers.
Until now commercial vehicle bodies have been exempt from excise duty and instead paid
a specific rate of INR10,000. This has been changed to 3% of the component value.