Finance Minister's Union Budget 2010 was positive for auto companies. Government hiked the excise duty by 2% — to 10% from 8% earlier. The industry, was expecting the duty hike and some quarters had expected a 4% hike.
The FM’s announcement came as a relief to the sector. Auto stocks like Maruti Suzuki, Tata Motors and Ashok Leyland were up between 2% and 5%.
The auto companies will pass the hike to customers with minor price hike, which will slow down sales.
| Company Name | Last Price | Prev Close | % Chg |
| TVS Motor | 70.35 | 65.9 | 6.75 |
| Tata Motors | 711.2 | 667.4 | 6.56 |
| Bajaj Auto | 1817.65 | 1712.35 | 6.15 |
| Ashok Leyland | 49.65 | 46.9 | 5.86 |
| Mah and Mah | 1007.75 | 957.1 | 5.29 |
| Hero Honda | 1777.65 | 1700.25 | 4.55 |
| Maruti Suzuki | 1459.95 | 1399.9 | 4.29 |
The auto companies will pass the hike to customers with minor price hike, which will slow down sales.
Another minor positive for auto companies was the weighted increase in research and development (R&D) exemption — though the pharmaceutical industry is the main beneficiary of the move.
The FM aims to implement direct tax code (DTC) and the goods and service tax (GST). Both tools, which would overhaul the country’s tax system, are to be implemented by April 2011. The GST aims to bring other taxes like excise, VAT, CST and other taxes under one umbrella and the GST rate may be lower than the combined total of the current taxes.
The hyper growth in the sector was also aided in part by the stimulus packages (excise duty cut from 14% to 8% and slashing of interest rates) that the government had unveiled in late 2008 and early 2009 when sales slumped.
FM says, weighted deduction reduced from 150% to 200% for in-house R&D, which is positive for auto companies. TVS Motor, Tata Motors, Bajaj Auto, Ashok Leyland, M&M, Hero Honda and Maruti rallied 4-6.7%.
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