Car-makers to raise prices after excise duty hike

New Delhi/Chennai, Feb 26 (Calcutta Tube) Car-makers Friday said they will hike prices of their cars by up to Rs.25,000 following a two percent hike in excise duty on all non-oil products and also by two percent on large cars and SUVs in the general budget presented Friday.

‘Hike in excise duty by two percent on all car segmnets is on expected lines. This will result in hike of cars,’ said the director general of Society of Indian Automobile Manufacturers (SIAM), an apex industry body representing 44 leading vehicle and vehicular engine manufacturers in India.

India’s largest car-maker, Maruti Suzuki India (MSI), said its cars would become dearer by two percent.

‘The hike in prices of cars is essential to offset the increase in excise duty announced by the finance minister (Pranab Mukherjee) in the annual budget,’ said MSI chairman R.C. Bhargava.

Another leading car-maker, Hyundai Motor India, said the hike in excise duty on cars will push its prices up, anywhere between Rs.6,000 and Rs.25,000.

In Chennai, General Motors said it will increase the prices of their car models after the increase in the excise duty on all non-oil products by two percent to 10 percent and on sports utility vehicles (SUVs) by two percent.

‘We will increase the prices of our models between Rs.7,500 and Rs.26,000,’ P. Balendran, director and vice president (Corporate Affairs), General Motors India Private Limited told IANS.

He added that the partial roll back of stimulus package was expected.

‘The thrust on use of environment-friendly vehicles by concession on electric vehicles is good. It will enable the manufacturers to get CENVAT credit on their inputs,’ he added.

Senior Director – South Asia, Middle East and North Africa (Automotive Practice) at Frost and Sullivan, V.G. Ramakrishnan, said: ‘For the auto industry, the two percent increase in excise duty relating to the SUVs (sports utility vehicle) and MUVs (multi utility vehicles) was a bit of a surprise.’

According to him, both the segments put together account for annual sales of around 300,000 units in India.

‘However, the segment is not growing exceptionally well. But the impact of the excise duty increase will not affect the sales as the buyers of these cars are well-heeled ones,’ he added.

Ramakrishnan said the two percent across the board increase of excise duty on non-oil products will not impact the growth of automobile sales. ‘Overall, I expect the prices to go up by 1.5 percent to 2.5 percent,’ he said.

On the excise duty relief for electric vehicles, he said: ‘This is a new market. Earlier, there was no excise duty (on such vehicles). Now, the manufacturers will get tax credit for the inputs.’

The United Progressive Alliance (UPA) government had spurred the automobile sector in 2008 by slashing excise duty on two-wheelers (from 10 percent to eight percent), small cars (from 12 percent to eight percent) and big cars from 24 percent to 20 percent.

India is now seen as a hub for the small cars segment and many global majors have ventured into India in the last four years.

Last year, companies marked their presence across the globe with record high exports. The year 2008 also saw the launch of the world’s most economical car, Nano.

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