The Finance Minister, Mr. P Chidambaram announced the budget which had no much cheer for the auto industry. The Finance Minister announced a hike in the excise duty on Sports Utility Vehicles and fully imported cars.
SUV’s will now attract 30% excise duty from 27%, while all luxury vehicles will attract 100% import duty as against 75%. earlier. The basic customs duty on motorcycles with engine capacity of 800cc or more is being increased from 60% to 75%.
The OEMS will pass on the increase in costs directly to the end customer who will have to have more to own a SUV or CBU. It remains unclear, if the duty is also applicable to compact SUV’s like the Mahindra Quanto and yet to be launched Ford EcoSport. This excise hike applies to all vehicles that carry 1500cc engines (both petrol and diesel), are over 4 m in length and have a ground clearance of 170 mm. It seems strange to use the ground clearance criteria considering the Indian roads demand the same. It will also affect the sedans which fail to meet the above criteria.
With the Auto Industry already beleaguered with falling sales, this news could further dampen the growth. In 2012 SUV & the MPV category showed the highest growth. The segment witnessed new launches in the form of Maruti Suzuki Ertiga, Renault Duster, Mahindra Quanto and Safari Storme and Nissan Evalia.
We can only hope, the finance minister to roll back the hike and introduce special schemes which will help to gain momemtum in the Auto industry.