Gasping for growth, automobile sector got a much needed relief from interim Budget on Monday as the Government announced excise duty reduction on cars after which many carmakers said they would pass on the benefits to consumers.
“GM India will pass on the excise duty relief to its consumers and is currently studying the fine print to determine the exact amount across its carlines,” said General Motors India Vice President P Balendran while talking to The Pioneer. Presenting the interim Budget 2014-15, Finance Minister P Chidambaram on Monday, said: “To give relief to the automobile industry, which is registering unprecedented negative gorwth, I propose to reduce excise duty for the period up to 30/06/2014.”
Excise duty on small cars, motorcycles and scooters reduced from 12 per cent to 8 per cent, while on SUVs it has been brought down to 24 per cent from 30 per cent. Excise duty on large cars will now be 24 per cent compared with 27 per cent earlier, while the duty on mid-sized cars will go down to 20 per cent from 24 per cent previously. Reacting on the excise duty reduction, Mahindra & Mahindra Executive Director & President -Automotive Pawan Goenka told at a CII event: “Almost everybody will do it immediately because nobody is going to buy the cars now without further price reduction.”
As per SIAM figures, car sales fell 7.6 per cent in January, the fourth straight month of decline, prompting SIAM to seek Government support in the upcoming interim Budget. Society of Indian Automobile Manufacturers (SIAM) President Vikram Kirloskar said the reduction in excise duty would reduce price, thereby making vehicles more affordable, which would improve the consumer sentiment and hopefully revive the demand for vehicles.
“This could hopefully herald a revival of the manufacturing sector in the days to come,” he opined. Reacting to the announcement, market leader Maruti Suzuki India MD and CEO K Ayukawa said the Finance Minister’s announcement was a much needed initiative. “We hope it will revive sentiment, and encourage people to buy automobiles. With passenger vehicle industry in negative zone this year, this was a much needed step,” he added.
While talking about passing on benefit to cosumers, a Tata Motors Spokesperson said: “We will definitely pass on the benefits of these excise reductions to the consumers for our new dispatches from tomorrow (as applicable) and are working on the details of the exact reductions.” Commenting on the development, Hyundai Motor India ltd (HMIl) Managing Director and CEO B S Seo said the excise duty cuts announced in the current budget has come as a breather to the struggling auto industry.
“This duty cut will make the cars more affordable since the benefit will be passed on to the consumers immediately,” he added. Deloitte Touche Tohmatsu India Senior Director Kumar Kandaswami said any reduction in vehicle prices is welcome in a difficult market. “This will particularly make the borderline customers – those that are choosing between a used car or a new one or between segments or between a two-wheeler and a car-to make a decision in favour of a car or to look for a higher segment,” he added.
The fact that the rate cut applies to the SUVs is significant, Kandaswami said. “The SUVs have been given the benefit possibly because of the fact that diesel will eventually get sold at market prices and the additional burden that was imposed on the SUVs in the recent past is sought to be removed,” he added. German luxury car maker Audi reduced prices of its five models by up to Rs 3.82 lakh after Finance Minister P Chidambaram decided to reduce excise duty on automobiles in the interim Budget 2014-15.