Car prices to be sliced, two wheelers too get benefited

Wednesday 19 February 2014, 11:34 AM by

The dark clouds hovering over Indian car industry finally seem to see the silver lining as the Finance Minister P. Chidambaram has announced to slash excise duty levied on small cars, SUVs and medium cars in the last interim budget of UPA-II presented on Monday. This means that prices of small cars, SUVs and medium cars will be sliced. Two wheelers like scooters and motorcycles will also be benefited as excise duty on two wheelers has been cut down to 8%.

Excise duty levied on small cars has been cut to 8% from 12% and will stay in effect till June 20, 2014. SUVs too have seen a sharp drop in excise duty by 6% from 30% to 24%. Auto makers like Tata Motors, Mahindra & Mahindra who have a tight grip in SUV segment see this as a great step and are hopeful that the sales of SUV will surge. In 2013, auto makers had to hike prices of SUVs which resulted in stagnant sales.

Among the small car manufacturers, Maruti Suzuki India and Hyundai will be benefited most by the excise duty slash, as they are leading players in the small car segments. Medium cars for which the excise duty was 24% has now come down by 4% to 20%. Mr. Vikram Kirloskar, President, Society of Indian Automobile Manufacturers (SIAM) expressed his joy over the excise duty slash and said, “"SIAM would like to thank the Finance Minister for recognizing the need for a more moderate tax structure for the automotive industry and for accepting SIAM's tax related recommendations. We believe that this reduction in Excise Duty would reduce the acquisition price thereby making vehicles more affordable which would improve the consumer sentiment and hopefully revive the demand for vehicles"

He added, "The Automotive industry is the engine of growth for the manufacturing sector as a whole as it supports key industries like auto-components, capital goods, raw materials, electronics, chemicals, plastics, software etc. Revived growth in the automotive industry would have significant positive impact on these key downstream and upstream manufacturing sectors that largely depend on the performance of the auto sector. This could hopefully herald a revival of the manufacturing sector in the days to come."

The automotive industry is enthusiastic about the new excise duties being implemented on small cars, medium cars and SUVs. Several head honchos from the auto industry have expressed their views on it referring this as a positive step.