Automakers set to cut prices with immediate effect

“The manufacturing sector needs an immediate boost. Hence, I propose the changes in some indirect tax rates. To give relief to the automobile industry, which is registering unprecedented negative growth, I propose to reduce the excise duty as follows for the period up to June 30, 2014,” the finance minister P Chidambaram announced in its Interim Budget Speech.

The excise duty on small cars, scooters, motorcycles and commercial vehicles will come down to 8 per cent from 12 per cent earlier. SUVs will attract excise duty of 24 per cent as against 30 per cent earlier. For mid-sized cars the duty will come down to 20 per cent from 24 per cent previously, while for large cars it will now be 24 per cent from 27 per cent.

Automobile manufacturers expect the cut to boost sales. RC Bhargava, chairman of India’s largest automaker Maruti Suzuki India said that the step will stimulate sales. “We are going to pass on the benefits to consumers with immediate effect. The discounts are for a shorter duration and will stimulate demand, as a prospective buyer would like to take the benefit of the reduced rates and may also advance their buying plans,” he said.

Following the announcement, Audi cut the price of its premium SUV Q7 by Rs 3.82 lakh to Rs 78.28 lakh from the earlier price of Rs 82.11 lakh. Mercedes-Benz also cut the price of its SUV GL-Class by Rs 2 lakh to Rs 72 lakh. The C-Class (C 220 Ava grand edition) would come down to Rs 39.35 lakh from Rs 39.9 lakh.

Society of Indian Automobile Manufacturers Association (Siam) expects consumer sentiments to improve with the cut.
“The cut would reduce the acquisition price thereby making vehicles more affordable which would improve the consumer sentiment and hopefully revive the demand for vehicles. Since automotive industry is the engine of growth for the manufacturing sector, revived growth in the automotive industry could hopefully herald a revival of the manufacturing sector in the days to come,” said Siam president Vikram Kirloskar.

Car sales in India declined for the first time in 11 years in 2013, posting a 9.59 per cent dip for the year, as the auto industry reeled under a prolonged demand slump due to the slowdown in the economy.