Vehicle makers' sentiments dented By higher duties

While maintaining a status quo with regard to the mass car and bike market intact, the Budget has made premium and luxury vehicles more expensive with a sharp increase in both excise and customs duties.

Sports utility vehicles (SUVs), the primary growth driver for carmakers in the past year and half, are set to become costlier by R35,000 to over R1 lakh with the hike in excise duties to 30% from 27%. However, the higher excise will only impact premium SUVs, or those which have over 1.5-litre engine capacity, are over four metres in length and have ground clearance of more than 170 mm.

"We will pass on the higher prices to the consumer. For us its not a good Budget. There is a lack of clarity on the higher excise on SUVs. Some vehicles, even though they may be seen as SUVs, will not be taxed higher," Toyota Kirloskar's deputy MD and COO (marketing and commercial) Sandeep Singh said. Anand Mahindra, chairman of India's largest UV maker Mahindra & Mahindra (M&M) tweeted, "Space occupied was the reason to tax SUVs. And yet larger more luxurious sedans are exempt. Neither an equitable nor an inclusive rule."

Auto companies with a high dependence on UV sales, such as M&M, Toyota Kirloskar and Tata Motors, will be the most hit, though the impact of higher taxes will also be felt across other players such as Maruti Suzuki, for whom the Ertiga MPV is in popular demand and Renault, for whom a major chunk of sales comes from the Duster compact SUV.

Joginder Singh, president and managing director, Ford India, said, "The automobile industry is a significant contributor to India's economy and future growth potential. We are disappointed that there is very little in the Budget that will help boost consumer confidence and revive growth. It is a missed opportunity to introduce measures that would have revived industrial growth significantly. As we all know, the automotive industry has been going through very challenging times. We are disappointed with the hike in the excise duty on SUVs."

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