Car Makers Cash in on Excise Duty Cuts - The New Indian Express

Car Makers Cash in on Excise Duty Cuts

Published: 20th February 2014 10:23 AM

Last Updated: 20th February 2014 10:23 AM

To capitalise on excise duty cut of 3 to 6 per cent  on cars, sports utility vehicles (SUVs) and two-wheelers, announced in the Interim Budget and revive sales, more auto makers announced cut in prices across models.

Car manufacturers ranging from hatchback to SUVs have announced price cuts ranging from `10,000 to `1,35,000 with immediate effect.

On Wednesday, the country’s largest car manufacturer Maruti Suzuki India (MSI), Hyundai Motor India, Honda Cars India, Volkswagen, Mahindra & Mahindra and Fiat announced price cuts.

While Maruti announced a price cut of `8,502 to `30,984 across all its product portfolios, Hyundai announced price cuts starting from `10,000 to `1,35,300 across various models.

Car companies have been cutting prices after Union Finance Minister P Chidambaram announced a 3-6% cut in excise duty in various segments on February 17 “to give relief to the auto industry, which is registering unprecedented negative growth.”

However, the timing of the excise cut is seen more as a ‘pre-poll strategy’ than a genuine effort to save the ailing sector.  The Indian automobile sector had witnessed decline for the first time in over a decade in 2013. Car sales declined in 2013, posting a 9.59 per cent fall, as the industry reeled under a prolonged demand slump due to the slowdown in the economy.

“The discounts are for a shorter duration and will stimulate demand, as a prospective buyer would like to take the benefit of the reduced rates and may also advance their buying plans,” Maruti Suzuki India chief RC Bhargava said.

Car companies are reeling under higher inventory costs, rising cost of imports due to depreciating rupee and inflation. The sector had sought support from the government to boost sales.

While German major Audi and Mercedes-Benz announced price cut up to `3.82 lakh, Tata Motors expressed its intent to follow suit. “We will definitely pass on the benefits of excise reductions to the consumers for our new dispatches (as applicable) and are working on the details of the exact reductions,” a Tata Motors spokesperson had stated earlier.

Commercial vehicles segment, whose growth is considered as an indicator of the health of the economy, registered a de-growth of 18.63%. It saw nearly 24 months of consecutive decline.

Since automotive industry is the engine of growth for the manufacturing sector, revived growth in the automotive industry could hopefully herald a revival of the manufacturing sector in the days to come,” said Society of Indian Automobile Manufacturers Association president Vikram Kirloskar.

“Excise duty is just one of the reasons for low sales. The other reasons (in the last two years) are more to do with high interest rates, low consumer sentiments and difficulty in the marketplace,” Abdul Majeed, auto analyst with PwC said.

Dealers and distributors add that they were already giving heavy discounts, free service, free accessories and attractive offers but these schemes had few takers considering the increasing cost of ownership due to high interest rates and recurring costs.  “The discounts only increased the number of customer enquiries but did not always translate into sales,” a Bangalore-based distributor said.

N Raja, Senior Vice President (Sales and Marketing) of Japanese automobile maker Toyota said that the cut in duties is a much needed relief to the sector  but adds, “we hope the same is backed by stability as the industry is already dealing with high inflation, sliding rupee, high fuel prices and slow economy.”

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