The announcement of the hike in excise duty from small cars to 12 per cent from 10 per cent was announced in the Union Budget on 16th March. Big cars will now be taxed 24 per cent instead of 22 per cent. The report of the excise duty hike has hit the automobile industry and the Original Equipment Manufacturers (OEMs) have decided to increase the car prices so that the excise duty hike is passed onto the customers.
R C Bhargava, Chairman, Maruti Suzuki India, in an interview was asked about the budget’s take on the automobile industry, also whether no diesel tax was positive and if the excise duty will impact demand. He said "Theexcise duty hike in any case has been passed on to the customers as we have decided to hike the product prices." However, he also added that the rise in the excise duty will not affect the two-wheeler segment of the market. According to him in the four-wheeler segment, the sales of diesel cars will continue to rise and in terms of petrol the sales will be very less.
In terms of the impact on demand he said that the hike had already been passed on, which would allow the company to sustain a favourable run-rate. Here, the important point was growth. About 70 per cent of the cars produced by Maruti Suzuki were petrol run and if the company hoped to grow it would have to sell substantial units of petrol cars. However, due to the difference in the prices of petrol and diesel and the high excise duty, pressure will build on petrol car makers.
The unclear diesel policy created a lot of tension among the automobile manufacturers. However, R C Bhargava said that the company will be investing in diesel engine manufacturing plant and also boost the number of diesel cars in its product range. Maruti Suzuki’s diesel capacity has been consumed and in the upcoming financial year the diesel engine capacity will get strengthened as Fiat will supply diesel engine to the firm. The capacity will be somewhere around 400,000 diesel vehicles this year. At the moment the diesel car segment accounts for 30 per cent volumes and it will continue to be the same in the next 3 to 4 years.
The chairman of Maruti Suzuki was also questioned on the rise in the import duty on foreign vehicles. He was asked if the 15 per cent hike, from 60 per cent to 75 per cent would affect the high-end domestic market. According to him, the customers belonging to this segment will not be too affected by the hike as all the cars in this segment were already quite expensive.
Lastly, R C Bhargava was asked if higher margin and improved production could be expected in the financial year’13, he said that it was very early to comment on this as the firm had not yet laid out a budget for the upcoming financial year.
