Mahindra & Mahindra Limited, the country's leading utility vehicle manufacturer, is looking at modifying some of its existing models, in order to avoid the additional 3 per cent excise duty mandated by the 2013-14 Union Budget. Following the latest regulations announced in the budget, the company has witnessed a decline in the sales recorded by its utility vehicles in the Indian auto market.
As per reports, Mahindra & Mahindra could be modifying its products so as to enable them to conform to any of the three parameters, such as length less than four metres, ground clearance below 170 mm and less than 1.5 litre engine displacement. This would allow the Mahindra utility vehicles to avoid the additional 3 per cent excise duty, which has been increased to 30 per cent from the previous 27 per cent.
Expressing his views on the same, Pawan Goenka, President, Automotive Division and Farm Equipment Sector (FES) at Mahindra & Mahindra Limited, was quoted as saying, “Such changes in policy also affects our product planning. We will do whatever possible to try to get back to 27 per cent excise bracket.” Apart from the compact Sports Utility Vehicle Quanto, all other Mahindra models, such as Xylo, Scorpio, Bolero and XUV500 are affected by the additional 3 per cent excise tax. As per reports, the utility vehicle maker's sales increased by just 2 per cent during April 2013, as compared to the growth of 27 per cent witnessed in the same year-ago period.
It has been revealed that the reduction in size of an existing carline could take one to two years, since the exercise is almost like building a new vehicle. Therefore, Mahindra & Mahindra is trying to lower the ground clearances and modifying the existing engines of its vehicles, in order to avoid paying additional excise duty. The company is mulling the idea of employing its 1.5 litre powertrains under-the-hood of its Bolero, Scorpio and XUV500 models, which are powered by 2.5 litre and 2.2 litre engines (Scorpio and XUV500), at the moment. Further, the ground clearance of Mahindra Scorpio stands at 180 mm, whereas XUV500 sits at the height of 200 mm above the ground.
Addressing the options that the company could use to avoid the excess excise duty, Pravin Shah, Chief Executive Officer, Automotive Division, Mahindra & Mahindra Limited, said, “While making changes we have to see that it does not impact performance, and yet meets the requirements.” He further added, “The 1500 cc engine could be underpowered. So, we don't want to do a product that will satisfy the excise requirement but not satisfy customer requirements. So, while there are enough competitive pressures there is this unnecessary taxation pressure too.”