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        Impact of 2013 Union Budget on auto sector

        CarTrade Editorial Team

        CarTrade Editorial Team

        Following the arrival of 2013 Union Budget, the premium cars like Aston Martin and Lamborghini with Sports Utility Vehicles (SUVs) like Mahindra Scorpio, XUV500 and Toyota Innova will now become dearer as an increase in excise and custom duty has been declared. The Finance Minister of India, P Chidambaram has raised the excise duty on SUVs from 27 per cent to 30 per cent. Expressing his views on this move, the Chairman and Managing Director of Mahindra & Mahindra (M&M), Anand Mahindra tweeted, “Space occupied' was the reason to tax SUVs.”


        Impact of 2013 Union Budget on auto sector
        Impact of 2013 Union Budget on auto sector

        On same lines, the President of Automotive and Farm Equipment Sector at Mahindra & Mahindra, Pawan Goenka said, “And yet, larger, more luxurious sedans are exempt. Neither an equitable nor an inclusive rule... The 3 per cent increase in excise duty for SUVs came as a surprise. It will certainly have a dampening effect on the industry. While the tax in itself is a concern, what I am perplexed about is the criterion for ground clearance. I fail to understand why a higher ground clearance is a demerit.”

        The proposed hike will also affect the other main players of the market like Maruti Suzuki and Tata Motors, which are performing well in the utility vehicle space. It must be noted that prior to the arrival of budget, several segments in the Indian auto market were witnessing not-so-good times, whereas the sales of utility vehicles were growing at a healthy pace. The announced hike is applicable on all those vehicles, which features a 1500 cc engine or above (both petrol and diesel) and are also over 4 metre in length and features a ground clearance of 170 mm. Industry experts believe that these parameters will include hot selling models like Maruti SX4 (petrol) and Honda Civic, among others.

        Reportedly, the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) is also a part of the 12th plan. This Union Budget has offered Rs. 148.7 billion to the JNNURM, wherein a large proportion will account for the purchase of around 10,000 buses, mainly in the hilly states. Industry experts believe that this decision comes as positive news for auto makers like Tata Motors and Ashok Leyland, which are known to be the dominating players of bus segment.

        The government focus on the road sector has been also increased in this Union Budget, which is likely to come as a boon for the auto sector in long run. The Finance Ministry has decided to frame a regulatory authority for the maintenance of roads. The government will now look on bottlenecks, which have been acting as a barrier for the new road projects will be now addressed.

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