The Hindu Business Line : ‘New duty won’t hit premium car sales’

New Delhi, June 14 The auto industry does not see the additional specific duty impost on premium cars impacting sales. However, industry representatives feel sales may be hit in the case of multi utility vehicles (MUVs) and sports utility vehicles (SUVs) that also serve as transportation in rural areas.

The Centre, on Friday, imposed a specific duty of Rs 15,000 on cars with engine size of 1,500 to 1,999 cc and Rs 20,000 on cars above 2,000 cc. This was on top of the existing 24 per cent ad valorem excise duty. The vehicles include cars such as Ford Fusion and Hyundai Verna and those in the super-luxury segment comprising the 7 Series models of BMW and S-Class of Mercedes.

While all the companies are yet to take a decision on increasing prices after the Finance Ministry’s announcement, they are likely to pass on the additional impost to consumers in the coming days.

Cumulative effect

Companies like Honda say the impact of the Rs 15,000-20,000 excise per se may not be much. But when seen in tandem with increasing interest rates and fuel price hike, there could be a cumulative effect on consumer sentiment.

“There is going to be an overall perception that buying cars is an expensive proposition for consumers,” said Mr Jnaneswar Sen, General Manager, Marketing and Sales, Honda Siel Cars India.

Hyundai Motor India said the duty hikes would not hit the company much as it is mainly in the compact car segment. The Centre has exempted cars with engine capacity below 1,500 cc from the latest duty impost. These include models ranging from Maruti Suzuki’s ‘800’ and ‘Wagon R’ to Honda City.

Push for small cars

“We are mainly in compact cars. So for us the effect is insignificant. But yes, overall it may not be good for those players in the upper segment,” said Mr Arvind Saxena, Senior Vice-President, Sales and Marketing, Hyundai.

The Society of Indian Automobile Manufacturers has said that the impact of higher excise duty would be more in remote markets, where utility vehicles such as Tata Sumo and Mahindra Scorpio serve as popular modes of transport.

However, spokespersons of both Tata Motors and Mahindra, the top players in the utility segment, said they would comment only after understanding the details of the policy.

Automobile industry experts felt that by its latest move, the Centre was pushing more for small cars, which anyway enjoy a lower excise duty.

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