AUTOMAKERS are keen that the stimulus package announced by the government in last year's

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budget continues for at least another year. Carmakers fear a negative impact should the stimulus be withdrawn.

However, the two-wheeler segment for a change does not have a budget wishlist.

"It is too early to withdraw the stimulus package.

The government should be careful and should continue the package for a longer duration," said P M Telang, managing director, India operations, Tata Motors.

"If the finance minister decides to withdraw the stimulus package, it will have a negative impact on the sales of utility vehicles. If that happens, we will be left with no option but to pass on the excise burden to consumers," Pawan Goenka, president (automotive sector), Mahindra & Mahindra, said.

The government reduced excise duties on cars smaller than 4 metres to 8 per cent as part of the stimulus package announced in December 2008, while the duty on bigger cars was left unchanged at 20 per cent.

In addition to the 20 per cent excise duty for big cars, vehicles having engine capacities between 1500 cc and 1,999 cc attract a fixed duty of Rs 15,000. Vehicles having engine capacities above 2,000 cc attract Rs 20,000 more.

Sales of passenger cars increased 24 per cent at 1,070,909 units between April and December this financial year, compared with the same period a year ago.

The RBI's recent hike in cash reserve ratio may also affect the liquidity position, and that, coupled with a withdrawal of the stimulus package, will lead to a negative impact on the automo bile industry, bile industry, according to Maruti Suzuki.

"If the liquidity situation gets squeezed, banks may eventually raise interest rates which will negatively impact car loans. The stimulus package should continue for another year," Shashank Srivastava, chief general manager-marketing, Maruti Suzuki India said. General Motors VP ,P Balendran, too, wants the stimulus package to be continued for another year.

Commercial vehicle (CV) makers stressed the need for the lower level of excise duty at 8 per cent to stay for another year to bring the segment back to pre-recession levels.

"If there is a compulsion to increase the rate of excise in the automobile industry for reasons of fiscal discipline, essential products such as commercial vehicles should be left out," Ashok Leyland managing director R Seshasayee said.

"The allocation under the Jawaharlal Nehru National Urban Renewable Mission for replacement of ageing vehicles should be increased further. JNNURM under last year's Union Budget has gone a long way in helping state transport corporations to either augment their fleets or replace ageing vehicles," Seshasayee added.

"Right now the CV industry is still fragile. If there is a change in excise duty for CVs it would affect the industry adversely. It is very important that the stimulus incentives given remain at least for some more time," MD and CEO Eicher Motors Siddhartha Lal said. Sales of commercial vehicles also increased 22 per cent at 352,575 units between April and December this financial year.

Alternate-fuel car marketers like Honda and Toyota are also hoping that the import duty of 110 per cent on electric vehicles and hybrids is reduced to promote clean technology vehicles.

"Our decision to bring hybrid offerings into the Indian market depends on the budget because we cannot make it here," VP , marketing, Honda Siel Cars India, Jnaneshwar Sen, said.

However, Kapil Singh, an automobile expert with Nomura Research, said the government might hike excise duty by 2 per cent.

"The finance minister is expected to increase excise duty by 2 per cent in the Union Budget. We believe that most of the companies will pass on the increase in excise duty completely if the hike is around 2 per cent.

Any increase higher than that may have some impact on volume growth. Buyers may rush in for last-minute purchases in February, ahead of the increase in duties," said Singh.

But analysts tracking the automobile industry are positive on the outlook for the sector. Said auto analyst at Karvy Stock Broking Arun Agarwal, "Moving ahead in February, we expect apprehension related to withdrawal of stimulus package would continue leading to robust retail demand. In the near term, withdrawal of the stimulus package remains a key risk to the sustainability of the current growth momentum."

"On a long-term basis, we remain positive on the Indian auto sector. Auto stocks are expected to rebound in the short to medium term.

Nonetheless, on relative trade-off basis, we expect these stocks to continue to outperform the benchmark indices in the long run," said senior research analyst at Angel Broking Vaishali Jajoo.

Hero Honda said they would comment on the budget at a later stage. And the country's second largest motorcycle maker, Bajaj Auto, said it does not have any expectations from the budget.

"We are very happy with the pick-up in the motorcycle market and therefore at this juncture we do not expect and worry much about pre-budget expectations", said S Sridhar, CEO (twowheelers), Bajaj Auto.

(With inputs from Balachandar G in Chennai and Michael Gonsalves in Pune)