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Recent Tax Cuts to Increase Sales of Automobile Sector

Lower automobile costs resulting from the recent tax sops announced to prop-up growth and reverse the economic slowdown and accelerate sector's sales

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automobile, cars, tax, growth
Not just reduced prices but even an expected up-tick in investment, courtesy the savings afforded by the tax sops, will aid the commercial vehicle segment. Pixabay

Lower automobile costs resulting from the recent tax sops announced to prop-up growth and reverse the economic slowdown, along with the upcoming festive season offers, have the potential to accelerate the sector’s sales, industry insiders said.

Market observers contended that reducing effective corporate tax rate to 25.17 per cent (inclusive of all cess and surcharges) from 30 per cent for all domestic companies will allow more auto firms to reduce prices.

At present, Maruti Suzuki has announced an immediate Rs 5,000 cut in the prices of its bestselling cars.

Besides, other companies such as Bajaj Auto, Piaggio India and Isuzu Motors India too have announced festive season discounts.

“Lower prices can increase demand incrementally, but cannot be expected to boost demand significantly,” Sridhar V., Partner at Grant Thornton India LLP, told IANS.

“Increase in liquidity will also help in increasing borrowings and thereby impacting buyers’ interest positively,” he added.

According to Fitch Ratings Associate Director Snehdeep Bohra: “Lower tax can help auto OEMs cut prices.

“But the overall scope for price reduction (as percentage of existing price) may not be very big in itself to spur demand… Improvement in sentiment and passing on of lower interest rates will be key.”

Not just reduced prices but even an expected up-tick in investment, courtesy the savings afforded by the tax sops, will aid the commercial vehicle segment.

“The effective corporate tax reduction is indeed a big supply side reform and should help spur investment cycle, which has been perpetually crippled,” Madhavi Arora, economist with Edelweiss Securities, told IANS.

“However, the supply side tax reforms generally have relatively long term economic returns, albeit impacting the revenue side in the near term,” Arora said.

At present, the automobile industry is suffering from a slowdown caused by several factors such as high GST rates, farm distress, stagnant wages and liquidity constraints.

automobile, cars, tax, growth
The key sectors to benefit from GST rate cuts are hotels, gems & jewellery, defence and automobiles. Pixabay

The industry’s sales and production levels have dramatically plunged, leading to job losses. In August, all major Original Equipment Manufacturers (OEMs) comprising passenger, commercial, two and three-wheeler manufacturers have reported massive decline in domestic sales.

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As per the Society of Indian Automobile Manufacturers’ (SIAM) August sales figures, the overall sectoral offtake in the domestic market has plunged 23.55 per cent to 1,821,490 units, from 2,382,436 units sold during the corresponding month of the previous year.

Moreover, the industry has estimated that around 15,000 contractual manufacturing jobs have been lost and another million are at risk if the slowdown is not reversed. (IANS)

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Global Smartphone Sales All Set To Reach 1.57bn Units in 2020: Gartner Report

The key focus for vendors will be access to 5G and enhancement of the camera technology within devices

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Smartphone
Smartphone sales will register growth in 2020 as the demand for mid-price smartphones rises in India. Pixabay

Global sales of smartphones to end users are set to reach 1.57 billion units in 2020, which is an increase of three per cent year over year (YoY), a new report by Gartner, Inc. said on Tuesday.

In 2019, worldwide smartphone sales declined two per cent — the first time since 2008 that the global smartphone market experienced a decline.

“2019 was a challenging year for smartphone vendors, primarily due to oversupply in the high-end sector in mature markets and longer replacement cycles overall,” Annette Zimmermann, Research Vice President at Gartner, said in a statement.

“However, in 2020, the market is expected to rebound with the introduction of 5G network coverage in more countries and as users who may have delayed their smartphone purchases until 2020 in expectation of price reductions begin buying again,” added Zimmermann.

According to the market research agency, sales of 5G mobile phones will total 221 million units in 2020 — which will account for 12 per cent of overall mobile phone sales — and more than double in 2021, to 489 million units.

“The commercialisation of 5G phones will accelerate in 2020. 5G phones costing under $300 have been announced, so sales growth of 5G phones is expected to exceed that of 4G phones over twelve months,” noted Zimmermann.

From a regional perspective, the Middle East and North Africa, mature Asia/Pacific and Greater China (including China, Taiwan and Hong Kong) will exhibit the highest growth rates in 2020, at 5.9 per cent, 5.7 per cent and 5.1 per cent, respectively.

Smartphone
Global sales of smartphones to end users are set to reach 1.57 billion units in 2020, which is an increase of three per cent year over year (YoY), a new report by Gartner, Inc. said on Tuesday. Wikimedia Commons

Strong demand for 5G phones in general, together with expectations of Apple’s first 5G iPhone, will bolster demand for smartphones, particularly in Asia/Pacific and Greater China. “Smartphone sales will register growth in 2020 as the demand for mid-price smartphones rises in India,” said Anshul Gupta, Senior Research Director at Gartner.

“Premium features including improved camera, display at affordable price will remain key for growth in the Indian smartphone market in 2020.” According to Gartner, attention at this year’s Mobile World Congress (MWC) will be drawn to 5G devices at either end of the price scale, some of which may be revealed before the event.

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“The key focus for vendors will be access to 5G and enhancement of the camera technology within devices,” said Zimmermann. (IANS)