Duty Hike Makes Luxury Cars Expensive

Monday 16 June 2008, 00:00 AM by Satish

Government of India has hiked excise duty on luxury cars in India. This is going to make the SUVs, MUVs and other cars with larger engines more expensive. This had been a completely unprecedented moved that has caught the auto industry unawares. The auto makers are already finding it tough to keep their profit margins up. Problems for the auto industry are already pouring in from all corners - car loan interest rates, fuel prices, steel prices are already all time high.

Government has increased central excise duty on all passenger vehicles with large engines. Engines with capacity of 1500cc up to 1900 cc shall attract an additional duty of Rs. 15,000 while cars with engines with capacity of 2000cc or more shall be taxed Rs. 20,000 higher. The overall hike for the on road prices would be nearly 25-27 percent for cars with engine capacity exceeding 1500cc.

The duty hike shall not hit sales of premium cars but shall definitely affect prices of Multi-utility vehicles and Sports Utility vehicles such as Hyundai Verna, Ford Fusion, etc. "It is not a good thing for the auto industry. We are already under pressure due to a variety of negative factors like high interest rates and fuel costs", said Arvind Saxena, marketing head of Hyundai Motor India. "If the sales drop, the realisations for the government will also come down", he adds.

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