Shares of auto stocks declined on Monday after reports that the government has proposed a hike in vehicle renewal and registration charges. Moreover, the government has also lowered the GST rate on electric vehicles in order to boost sales of EVs.

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Maruti Suzuki, Bajaj Auto, Hero MotoCorp and Ashok Leyland touched their 52-week low on Monday. Intraday, the shares of Tata Motors, Bajaj Auto and Ashok Leyland slipped 5.57 percent, 6.41 percent and 4.45 percent respectively. Meanwhile, shares of Eicher Motors fell 4.73 percent, Hero MotoCorp plunged 5.52 percent and that of Maruti Suzuki declined 3.54 percent respectively.

In last one year, the Nifty Auto Index has come down 35 percent against a gain of 1.3 percent in Sensex.

CLSA in its research report said, “Contrary to hopes of some policy support for autos, the government has proposed a hike in vehicle registration charges, which would raise on-road prices of new vehicles by c.0.5 percent-2 percent. The draft bill also attempts to incentivize scrappage by providing an exemption of new vehicle registration charges for those scrapping vehicles older than 15 years and higher renewal fees for those owning old vehicles.”

According to the brokerage, the price of new vehicles will increase if the hike in registration charges is applied by the government. While the resulting price increases on a standalone basis are not large, these will add to the cost push from new insurance, safety and the upcoming emission norms.

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First Published:Jul 29, 2019 12:03 PM IST