Sensex Trades in Green; Auto Stocks Top Gainers

Tue, 19 Dec 01:30 pm

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After opening the day on a positive note, Indian share markets have continued the momentum and are currently trading in green. Sectoral indices are trading on a mixed note, with stocks in the consumer durables sector and stocks in the auto sector witnessing maximum buying interest. While stocks in the IT sector are trading in red.

The BSE Sensex is trading up 88 points (up 0.3%) and the NSE Nifty is trading up 28 points (up 0.3%). Meanwhile, the BSE Mid Cap index is trading up by 1%, while the BSE Small Cap index is trading up by 1.1%. The rupee is trading at 64.14 to the US$.

In news from the automobile sector. According to an article in a leading financial daily, the automobile industry body Society of Indian Automobile Manufacturers (SIAM), is seeking two tax rates for passenger vehicles under the Goods and Service Tax regime instead of multiple rates levied currently.

Currently, under the GST regime, small petrol cars with engine capacity less than 1200 cc attract 1% cess, while diesel cars with engine capacity of less than 1500 cc attract 3% cess, on top of the 28% tax.

Similarly, cess on hybrid cars, including mid, large and SUVs, remains at 15%, likewise those vehicles used for transport of not more than 13 passengers.

According to the article, SIAM has sought for a special tax rate of 12% for electric and hydrogen fuel cell powered vehicles. Additionally, in the electrical vehicle vertical, the industry has sought extension of custom duty concessions for additional critical components.

Currently, electric vehicle sales are low in India, rising 37.5% to 22,000 units in the year ended 31 March 2016 from 16,000 in 2014-15. Only 2,000 of these were cars and other four-wheelers, according to automobile lobby group SIAM.

The government wants to see 6 million electric and hybrid vehicles on Indian roads by 2020 under the National Electric Mobility Mission Plan 2020.

Is India Prepared to Meet the Ambitious Battery Car Target?

The government is targeting to have all cars propelled by electric engine by 2030. The target is more daunting than in many advanced countries.

According to the industry, the 2030 target would require eight to ten times the global stock of such vehicles. India would need to sell more than 10 million electric cars in 2030, compared to 5,000 electric vehicles India had on the road in 2016.

As you can see from the chart above, India is barely visible compared to other developed countries when it comes to battery cars.

As an article in Business Standard suggests, such a big jump in scale for the auto industry in 13 years seems difficult. The basic infrastructure is missing. There are not enough charging stations. For this massive shift, the charging stations will need to be as ubiquitous as petrol pumps.

Another issue is the price of the lithiumion battery, which constitutes 30% to 40% of the cost of the car. For this plan to succeed, the price of the battery needs to come down.

The auto industry is already facing regulatory headwinds. The shift from BS-IV emission norms to BS-VI has been two years ahead of schedule without an intermediate stage. The government, if it is serious about such ambitious targets, should offer the necessary infrastructure support and do its bit for a smooth transition.

Moving on to news from stocks in the oil and gas sector. GAIL India share price is in focus today after the Oil Minister clarified that the company is renegotiating its liquefied natural gas purchase deals with US-based firms.

GAIL has signed contracts for sourcing up to 5.8 million tonnes of LNG from the United States.

GAIL has held number of discussions with Cheniere Energy (Sabine Terminal) and Dominion Cove Point LNG LP (DCP Terminal), for re-negotiation of the contract, the latest discussions were held in November.

India wants to raise the share of natural gas in its energy mix to 15% in the next few years from about 6.5% now. But price-sensitive customers in the country forced renegotiation of the price of two long-term LNG deals.

Pricing of U.S. LNG is linked to a formula but other charges including freight to India add an extra US$ 2-3 per million British thermal units, leading to GAIL scouting for destination, time and volume swap deals.

India has in the past renegotiated LNG deals with Qatar's RasGas and Exxon Mobil Corp as spot prices have declined substantially amid a supply glut.

At the time of writing, GAIL India share price was trading up by 0.3%.

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