The year 2012 will be expensive for car lovers as auto makers will pass their increased tax burden on the consumers. After Finance Minister’s decision of increasing the excise duty, companies such as Honda Siel Cars India, Mahindra & Mahindra and General Motors India informed about the price increase of their car models. The league was followed by bigger players like Tata Motors, Hyundai Motor India, and Maruti Suzuki India.
As per reports, prices small cars such as Beat, Aveo and Spark, could be increased by General Motors India between Rs. 4,000 and Rs. 8,000. Buyers may have to pay Rs. 32,000 more for bigger cars like Chevy Cruze. There will be Rs. 60,000-70,000 increase in the price of luxury sedan Honda Accord. Even Brio will cost Rs 7,000 more. Mahindra & Mahindra is also planning to increase the prices of Scorpio, XUV500, Verito sedan, and Bolero by between Rs. 6,000 and Rs. 30,000.
Car makers have decided to pass the hike to customers due to the increasing input cost. Even though the automobile industry has been exempted from additional tax on diesel cars, from April, every auto parts including cars themselves will become costly. Increase in custom duty on flat steel from 5 percent to 7 percent can be expected after the decision of Pranab Mukherjee.
Steel, which is responsible for increase in custom duty of 200 basis points and 80 percent of all raw material costs of auto maker, will move up the manufacturing cost of companies. Hence, from April, every car whether it is Nano or BMW 7 series will become expensive. There will be 60 percent to 75 percent increase in custom duties for imported luxury cars costing $40,000 and above.
Automobile companies manufacturing vehicles with engine displacements more than 1500 cc will be worst affected as they now have to pay Rs. 15,000 levy including 27 percent tax instead of 22 percent. An official from a leading car maker, said, “Think of even a non-luxury large car such as the Maruti SX4 petrol. Earlier, it was taxed at 22 percent plus Rs 15,000. Now, it will have to pay 27 percent tax on its ex-factory price, which is a substantial increase and most of it will have to be passed on to the consumer."
Lowell Paddock, President of GM India, said the company has made sufficient investment in diesel and have no future investment plans for additional capacity. However, it will now increase the diesel portfolio. According to S Sandilya, President of the Society of Indian Automobile Manufacturers (SIAM), Government by making import of foreign cars expensive seems to motivate local manufacturing. Finance Ministers decision to exempt diesel cars from higher taxation have been appreciated by S Sandilya.
