The BSE Auto index, which slipped 3 per cent during intraday trade on Tuesday, ended 1.77 per cent lower, after Road Transport and Highways Minister Nitin Gadkari mooted imposing an additional 10 per cent GST on diesel vehicles, only to clarify later that there is no such proposal currently under the government’s consideration.
Tata Motors, Mahindra & Mahindra and Ashok Leyland fell 2.19 per cent, 1.55 per cent and 2.68 per cent, respectively.
At close, the BSE Auto index was down 1.77 per cent at 36,406, while the BSE Sensex ended flat at 67,221 points.
“In our view, the mandatory phase-out of diesel engines to replace them with electric vehicles (EVs) will impact the profitability of fleet operators, as the cost of acquisition is higher for EV vehicles compared to ICE-based vehicles. Furthermore, the lack of charging infrastructure is also impacting the adoption of electric vehicles, especially in the MHCV and ICV segments. On the PV side, M&M and Tata Motors will see a major impact from the new goods and service tax (GST) rate if implemented, compared to Maruti Suzuki India Limited (MSIL),” said Kripashankar Maurya, assistant vice-president for research (Automobile/Defence) at Choice Broking.
Among individual stocks, Tube Investments of India was the biggest percentage loser in the auto pack, going down 8.99 per cent on the BSE Tuesday. Others like Tata Motors, Bosch, Balkrishna Industries and Eicher Motors declined between 1.5 and 2.5 per cent.
Thus far in calendar year 2023 (CY23), the Nifty Auto index has seen a good run, rising nearly 30 per cent (till September 11), as compared to the 10 per cent rise in the Nifty50 index during this period.
Tata Motors, Sona BLW Precision Forgings, TVS Motor Company, Samvardhana Motherson International, Tube Investments of India, and Bajaj Auto have been the top performers that have moved up between 32 per cent and 64 per cent, respectively during this period, ACE Equity data shows.
Gadkari's statement, according to A K Prabhakar, head of research at IDBI Capital still is a wishlist, and may not see the light of day immediately, especially with the upcoming state and the general elections in 2024.
“The statement is a wishlist and is still not on the FM's table yet. I don't think it will be implemented in a hurry as the ramifications will be far and wide, especially for the CV-makers like Tata Motors and M&M, who will end up bearing the brunt of this measure, if implemented. This proposal, if implemented, will increase transport costs, which the government may want to refrain from ahead of the upcoming election season. I think the markets have reacted too soon, and the fall is merely a knee-jerk reaction,” he said.