Union Minister Nitin Gadkari has strongly defended the E20 fuel rollout program, dismissing allegations of a paid political campaign against him and the initiative. Speaking at the 65th SIAM Annual Convention, Gadkari addressed recent controversies and shared optimistic projections for India's logistics sector.

E20 Fuel Rollout Vindicated

Gadkari asserted that claims against the E20 fuel implementation have been proven false. The Supreme Court's rejection of petitions challenging the E20 program has further bolstered the government's stance. According to the Minister, all testing agencies have confirmed that there are no issues with the implementation of E20 fuel.

Gadkari stated, "The allegations were part of a paid political campaign against me regarding the E20 fuel rollout," emphasizing the program's validity and importance.

Call for Intensified Efforts in Biofuel Vehicles

During his address, Gadkari urged the auto industry to ramp up efforts in developing and promoting biofuel vehicles. This push aligns with the government's broader goals of reducing pollution and enhancing energy security. The Minister reiterated his call for offering discounts on the scrapping of old vehicles, a move aimed at accelerating the adoption of newer, more environmentally friendly models.

Appreciation for Industry Compliance

Gadkari expressed gratitude to the auto industry for their successful transition from BSIV to BSVI emission standards. This shift represents a significant step towards reducing vehicular emissions and improving air quality across the country.

Projected Reduction in Logistics Costs

In a positive outlook for the sector, Gadkari projected that logistics costs in India would see a substantial decrease. "We expect logistics costs in India to fall to 9.00% by the end of 2025," he stated. This reduction could have far-reaching implications for the auto industry and the broader economy, potentially boosting competitiveness and efficiency.

GST Relief Measures for Auto Sector

Gadkari has urged Finance Minister Nirmala Sitharaman to provide GST concessions for customers scrapping old vehicles to purchase new ones. He stated that this would support demand for cleaner cars and boost the government's scrappage policy.

Separately, Union Minister Piyush Goyal assured automobile dealers he would raise their GST concerns with the Finance Ministry, particularly regarding compensation cess treatment on existing inventory purchased before recent GST rate cuts. Dealers face potential losses of nearly ₹2,500.00 crore from unclaimed cess on vehicles bought at the previous 28% GST rate plus cess, as input credit claims end after September 22.

Recent GST Changes

The GST Council recently reduced tax rates on automobiles:

• Small car taxes: Cut to 18% from 29-31%
• Larger vehicle taxes: Reduced to 40% from 50%
• Compensation cess: Withdrawn

The Minister's statements and projections come at a crucial time for India's auto sector, which is navigating the challenges of technological transitions, environmental concerns, and economic pressures. As the industry continues to evolve, the government's support and policy directions will play a pivotal role in shaping its future trajectory.

The Indian auto sector received a significant boost as the GST 2.0 reforms introduced sweeping tax cuts across various vehicle categories, leading to reduced prices and improved demand visibility. The reforms have sparked a wave of optimism among investors and consumers alike, with the Nifty Auto index surging 12.00 percent in response to the news.

Tax Cuts Across Vehicle Categories

The GST 2.0 reforms have implemented tax reductions on a wide range of vehicles:

• Small cars
• SUVs
• Two-wheelers
• Tractors
• Auto components

These tax cuts are expected to make vehicles more affordable for consumers, potentially driving up demand across various segments of the auto market.

Automakers Pass on Benefits to Customers

In response to the tax cuts, multiple automakers have announced price reductions to pass on the benefits to their customers. Some of the prominent companies that have declared price cuts include:

• Tata Motors
• Mahindra & Mahindra
• Hyundai
• Toyota Kirloskar Motor
• TVS Motor Company
• Bajaj Auto
• Hero Motocorp
• Eicher Motors

This move is likely to stimulate consumer interest and boost sales across the industry.

Impact on Three-Wheelers and Premium Two-Wheelers

The reforms have had varying impacts on different vehicle segments:

Three-Wheelers

GST on three-wheelers has been slashed to 18.00 percent, making them more affordable for Tier-II and Tier-III markets. This reduction is expected to drive growth in this segment, particularly in smaller cities and rural areas.

Premium Two-Wheelers

Motorcycles with engine capacity above 350cc face a negative impact, with tax rates rising to 40.00 percent. This increase may affect brands like Eicher, which specializes in premium motorcycles.

Stock Market Response

The auto sector reforms have triggered a positive response in the stock market:

• The Nifty Auto index climbed 12.00 percent, reflecting investor optimism about lower taxes spurring demand and improving profitability.
• Heavyweight stocks such as Eicher, Mahindra & Mahindra, and Ashok Leyland reached fresh highs.
• Brokerages, including Bank of America, issued buy calls on Maruti Suzuki and Mahindra & Mahindra, citing strong demand recovery prospects.

Electric Vehicles Remain Unaffected

Electric vehicles (EVs) remain unaffected by the new tax reforms, with their tax rates steady at 5.00 percent. This stability in EV taxation may continue to support the government's push towards electric mobility.

Trade Minister's Statement on FTA Talks

India's Trade Minister has stated that automotive suppliers are not requesting protection in free trade agreement (FTA) negotiations. This stance suggests that the auto component industry is confident in its competitiveness on the global stage. The minister also indicated that these trade deals will allow a wider range of car options to enter the Indian market, potentially offering consumers more choices and fostering increased competition in the automotive sector.

Conclusion

The GST 2.0 reforms have injected new life into the Indian auto sector, with tax cuts leading to price reductions across various vehicle categories. As automakers pass on the benefits to consumers, the industry anticipates stronger demand and improved profitability. While most segments stand to gain from these reforms, premium two-wheeler manufacturers may face challenges due to increased tax rates. Additionally, the Trade Minister's comments on FTA negotiations suggest a more open approach to international trade in the automotive sector.