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Our Bureau

Mumbai, Nov. 18 Will car and two-wheeler companies go by what the Finance Minister, Mr P. Chidambaram, said on Tuesday and reduce prices of their vehicles? On the face of it, this seems an impossible task going by what some CEOs had to say.

For instance, the President of Mahindra & Mahindra’s automotive division, Dr Pawan Goenka, told Business Line, “At this time, we are still coping with the impact of commodity prices over the last few months and cannot consider any reduction in the price of our vehicles.”

In the case of companies like M&M, their sport-utility vehicles and the Logan sedan are already levied 24 per cent excise duty which is twice as much as that on small cars and two-wheelers. Further, some months after the Budget, the Government slapped an additional Rs 15,000 excise duty on cars and SUVs with engine capacities between 1500 cc and 2000 cc and Rs 20,000 on those above 2000 cc.

“For a start, it will help if the Government rolls back this levy and also brings down excise duty levels on mid-size cars on a par with small cars. We would then happily reduce prices and pass on the benefit to customers,” a top industry official said.

Other CEOs who spoke on condition of anonymity said it was practically impossible at this stage to contemplate any reduction in prices. “Most of us could not even hike prices a few months ago when raw material costs were going through the roof. It is even tougher now when the economy is going through such a severe downturn,” one of them said.

This is especially true for the two-wheeler sector which is facing added pressure because of inadequate retail financing for nearly two years now. And though the Finance Minister has promised to consider excise duty cuts, it may not help too much given that it is already down to 12 per cent on two-wheelers (and small cars) and any further reduction will only impact Government revenue.

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