Maruti Suzuki Budget Reaction - Detailed Insights | V3Cars
In this article, we’ll present Maruti Suzuki’s reaction to the 2023 budget. Based on the announcements from the finance minister and the statement from the carmaker, we’ll try to understand how the 2023 budget impacts Maruti Suzuki in the short and long term.
Here’s what Mr. Shashank Srivastava, SEO marketing and sales, Maruti Suzuki said about the Budget 2023:
“The growth of the automobile industry has a high correlation with overall growth of the economy. Therefore, any measure which helps the overall growth of the economy will benefit the automobile industry.
With reduction in income tax, the disposable income of individuals across all categories is set to increase. The announcements regarding capex, will further have a positive impact on both the demand as well as supply side of the economy.
While in the short term, this will help generate demand, in the medium and long term it will help generate capacity when output gap decreases due to increased consumption. Investment in areas such as railways, increased agricultural credit target, policies on scrappage and encouragement of biofuel will also lead to a positive impact.
However, we still need to watch out for factors such as inflation, bank interest rates, liquidity, and geo-political tensions, which may impact growth.”
V3Cars Insights - First-Mover Advantage
Maruti Suzuki lauded the announcements regarding biofuels. Given their investment and exploration in the bio CNG and flex fuel engines, the support from the government towards cleaner fuels is welcome. Especially for Maruti Suzuki as they are the early movers in this area. You can read more about their efforts in this area in the following articles:
Lower Income Tax = Higher Demand
Maruti Suzuki also welcomed the changes to the income tax slabs. Although the newer tax slabs aim to reduce the burden on the salaried class, they also do away with deductions and do not encourage investing in ELSS mutual funds, buying health insurance and life insurance. This hinders the nation’s growth from the salaried class. However, it’s worth noting that currently, the older tax structure is also available to those who want to avail deductions in income tax.
The newer, simplified tax structure will also simplify the filing process but with no room for deductions, it’s likely to help the government with higher tax collections. Maruti Suzuki hope to achieve higher sales because of the increase in disposable income with the newer tax slabs.
The carmaker also welcomed the scrappage policy. In the 2023 Budget, the finance minister didn’t add any sections to speed up the scrapping process, which could help spur demand. So far, the 10-year life rule for diesel cars and 15-year life for petrol cars have helped all car manufacturers with higher demand. The budget only addressed the scrapping of government vehicles. Since Maruti Suzuki also supply a good number of vehicles to government agencies, we can expect to see some demand coming from this announcement. The finance minister, Nirmala Sitharaman, herself arrived in a Maruti Nexa Ciaz to the Lok Sabha to deliver the 2023 Budget speech.
Maruti Suzuki see the following concerns, which could cause the growth to slow down, or worse, suffer a decline:
- Inflation: In 2020-2021, the high-liquidity from easy monetary policy across all countries helped spur demand in almost all sectors. The auto industry also enjoyed a free ride in terms of sales as well as valuations.
- Bank interest rates: However, inflation is making it difficult to keep the economy moving forward at a steady pace. So, central banks are starting to hike interest rates and limit the easy flow of money in the economy.
- Liquidity: These hikes in interest rates in the 2022 calendar year were too steep. Such steep rate hikes could trigger a multi-year economic slowdown. We’re already starting to see layoffs in the IT sector but it’s very easy for the ripples to spread to other sectors and adversely affect the auto industry as well.
- Geo-political tensions: The only concern, which doesn’t have anything to do with the other points, is geo-political tensions. Currently, there’s a hot war going on between Ukraine and Russia. The risk of a nuclear engagement remains open as long as at least one of the countries possesses such capacity. Among other geo-political issues, if China decide to enter an economic war, or worse, a hot war, then it could impact the entire global economy.
Missing In Reaction - Electric Vehicles, Hydrogen
The most prominent point missing in Maruti Suzuki’s statement is the acknowledgement of the government's efforts towards manufacturing batteries for electric vehicles and green hydrogen.
It’s worth noting that Suzuki are setting up a battery plant as well as an EV production plant in India. However, it’s clear that Maruti Suzuki are lagging in the EV adoption race. So, these announcements are likely to have a greater benefit for other carmakers like Tata and Mahindra.
Also Read: Pros And Cons Of Electric Vehicles
In terms of green hydrogen production, Toyota are experts but Maruti Suzuki are falling behind. Even if Maruti Suzuki decide to pick up on hydrogen propulsion systems, it’ll probably benefit Tata Motors more than any other car manufacturer. This is because Tata Motors are the most aggressive with adopting hydrogen fuel for their vehicles. You can read more about Tata’s hydrogen strategy at the following link:
Also Read: Pros And Cons Of Hydrogen Fuel Cell Vehicles
Maruti Suzuki are also working on using hydrogen as a supplement in their CNG cars. This will gradually move them towards cleaner fuels without any drastic changes in the customer’s ownership experiences. You can read more about Maruti’s hydrogen CNG (H-CNG) plans at the following link:
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