Auto shares such as Bajaj Auto fell in trade today after the Finance Ministry cut the rebates paid on certain types of exports to 2 percent from 5.5 percent earlier.
Indian auto makers get refunded a portion of local taxes paid for components used in vehicles, motorcycles or auto parts that are sold overseas. Due to the cut, rates on motorcycles, 3-wheelers and medium and heavy commercial vehicles have been cut to 2% from 5.5%. Moreover, duty drawback rates on light commercial vehicles have been reduced to 2% from 4%.
Unlike other auto majors which largely depend on local sales, Bajaj Auto relies heavily on sales from Africa, SE Asia and Middle East. Exports accounted for 36 percent of Bajaj Auto’s total sales by quantity and 33 percent by revenue in the last financial year ended in March.
Brokerage Nomura expects that fiscal 2014 earning of Bajaj Auto, Ashok Leyland, and TVS Motors (will be impacted by 6 to 10 percent, assuming prices of their vehicles remain constant.
Exports accounted for 36 percent of Bajaj Auto’s total sales by quantity and 33 percent by revenue in the last financial year ended in March. . TVS Motor has about 11 percent or so of sales that comes from exports while Ashok Leyland have about 10-11 percent that comes from the export market.
Bajaj Auto stock is down 1.8 percent, TVS Motors is down 1 percent while Ashok Leyland is down 0.8 percent.