The Hindu Business Line : Automobile dealers await manufacturers’ move on excise duty

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Automobile dealers await manufacturers’ move on excise duty

Suspend sales over uncertainty of price.

Earlier, when the Govt reduced tax, cos including Tata Motors and Maruti bore the tax burden of the unbilled stock.

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Mumbai/New Delhi/Chennai, Dec. 9 Automobile dealers say they have not seen an increase in customer enquiries just a day after the Centre announced a 4 percentage point excise duty cut, prompting vehicle manufacturers to announce price cuts.

The issue is not one of price, but of availability of finance, according to them.

It is still early to gauge the impact, dealers say, adding that the bigger issue is who will bear the burden of the higher excise duty paid on the vehicles that they have paid for. They are waiting for word from the manufacturers on this issue. Almost all manufacturers have sent circulars announcing a price cut, but are silent on the excise duty burden, according to the dealers.

Earlier, when the Government reduced tax, companies including Tata Motors, Maruti, Hyundai and Ford bore the tax burden of the unbilled stock. This time also we expect the same, a dealer said.

When contacted, a cross-section of dealers in Mumbai said they had suspended sales because of uncertainty over the price.

“We have asked customers to wait till we get a message from the manufacturers confirming that they will bear the additional cost. We are explaining to them the new price but have asked them to wait,” said Mr Rajan Masurkar, CEO, Vitesse, a Maruti Suzuki dealer in Mumbai. He expected Maruti to bear the tax burden fully. The company was concerned about the viability of the business at the dealer end. “Till the time this uncertainty is cleared, I am not excited,” he said.

When contacted, a Maruti spokesperson said the company had compensated the dealers in the past. “In February, when the duty was lowered, it cost us around Rs 50 crore. We will calculate how much it will cost us this time.”

A leading car dealer in Chennai said the issue was not the price, but the availability of finance. “You are not going to buy something just because it is cheaper now,” he said, requesting not to be identified. Even before the duty cut, customers were interested in buying vehicles, but the problem was lack of finance.

Finance crunch

Earlier, for a Rs 3-lakh car, a customer could get a loan up to Rs 3.20 lakh, which would cover the cost of insurance, registration and road tax. Now banks want the customers to bring up to Rs 1.50 lakh as upfront payment. Customers are not willing to lock up so much of their own funds. Against 10 per cent of loan applications being rejected earlier, nearly 20-25 per cent of applications were being turned down, according to him.

If dealers are not able to liquidate their stocks before the month-end, they will have to carry them over to next month, which will see a model year change, and this will call for higher discounts.

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