Shares of auto companies, mainly diesel vehicle makers, slipped in intra-day deals on Tuesday, after Nitin Gadkari, Minister of Road Transport and Highways of India, said he planned to approach the Finance Minister Nirmala Sitharaman with an additional tax proposal on diesel vehicles of 10 per cent.
Mahindra & Mahindra cracked over 4 per cent to hit a low of Rs 1,513. Motherson Sumi, Cummins and Ashok Leyland were the other major losers, down over 3 per cent each.
Meanwhile, the BSE Auto index plunged nearly 3 per cent in intra-day deals, down to a low of 36,135 as against the day’s high of 37,188. At 12:10 PM, the BSE Auto index was down 2.2 per cent at 36,238, while the BSE Sensex flat around 67,100-odd levels.
However, there is no clarity yet on whether it will be implemented on passenger vehicles (PV) / commercial vehicles (CV), or both, and the implementation timeline.
“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 among the Auto pack, down over 7 per cent on Tuesday. Others like Tata Motors, Bosch, Balkrishna Industries and Eicher Motors declined around 2 per cent each.
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.
Mr. 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 when the country is entering into an election mode with the upcoming state and then the general election 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.