Finance Minister P Chidambaram has proposed in the Budget for financial year 2013-14 an increase in custom duties on high-end luxury cars from the current 75 per cent to 100 per cent, those on certain SUVs are hiked from the existing 27 percent to 30 percent and from 60 per cent to 75 per cent and motorcycles above 800cc are hiked. He, however, did not include a reduction in excise duty on small cars, as the industry had hoped.
SUVs which are registered as taxis would not be levied this additional tax. As the number of SUVs in the country has proliferated from 14 per cent in the previous fiscal to 20.51 per cent this year, the sales would eventually impact.
While looking at the customs duty on luxury cars, manufacturers like Audi, BMW, Mercedes-Benz, Jaguar and Volvo who have a significant number of models as CBUs will be hit by the steep 25 per cent hike in customs duties. As far as motorcycles go, the 15 per cent duty hike will affect Harley-Davidson, Ducati and BMW, all of whom have bikes above 800cc on sale in India. Hyosung escapes the hike as all of its four bikes in India are below the 800cc.
According to Audi India Head, Michael Perschke, the Budget will severely impact the auto industry and its growth. We will have to seriously evaluate the impact of this hike on our prices and, have no choice other than to pass on the increase to the customer. Overall it will have an adverse impact on automobile industry which is already going through a slowdown and specifically affect demand including that of SUVs.
Currently, the industry is facing pressure from a number of factors like increasing fuel prices, high input costs, persistent inflation, high interest rates; the increase in excise and customs duty will be a dampener. The government should have looked at extending support to auto industry, which has been contributing, significantly to the GDP and could have formed a strategic pillar of industrial development.
We are happy to note that there is a renewed focus on infrastructure especially roads. The proposed regulatory authority on road construction will hopefully fuel better infrastructure and speed up developments, he added.
Obviously, the hike in import duty of fully built luxury cars did not auger well with premium car majors, operating in India. Pawan Shetty, Head, Lamborghini India said that the move was very disappointing for the luxury car import segment. ‘If you see the last two years, the absolute duties had showed an upward tick of 67 percent. Subsequently, we will be forced to review our prices soon. We have left with no option other than to pass it on to the customer.”
The only relief is the extension of sops for electric vehicles till financial year 2015. Another positive turnout is the provision of tremendous fillip to the sagging commercial vehicle segment, by earmarking Rs 14,883 crore for the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in this year’s Budget. Mr Chidambaram has included Rs 14,883 crore for the purchase of about 10,000 buses under the city modernisation scheme, and the state PSUs would greatly get benefitted by this announcement.
Takayuki Ishida, MD & CEO, Nissan Motor India said, “There is no significant or drastic change in the budget this year. The 2013 budget is a “budget in motion” as it continues to focus on growth in predominantly primary sectors like agriculture, infrastructure and education. This growth will in turn support the growth in other sectors including the automobile industry.
We are very happy about the investment allowance of 15% for investments above Rs 100 Cr as a tax incentive. We stand to benefit from this as we have plans to expand our operations in India.
We are also happy about the Chennai – Bengaluru Industrial Corridor to be developed jointly by the Department of Industrial Policy and Promotion (DIPP) and the Japan International Cooperation Agency (JICA). This industrial corridor will play an important role in terms of logistics infrastructure for companies like ours which are present in the said region. The excise hike for SUV will not have a drastic impact; it is most likely to distinguish the price barometer between sedans and SUVs even more clearly than ever before.”
Sandeep Singh, Deputy Managing Director of Toyota Kirloskar Motor felt that it was overall a balanced Budget. He did express his reservation at the way the Indian automotive industry was treated by the Budget, when the industry was seeking a lift from the sagging sales. ‘The Budget has not brought any cheer for the passenger vehicle segment either. In fact, we were looking at some kind of rebate on excise duty front and in turn, the duty on SUVs have been hiked in the Budget. I do agree that our customers might as well come to terms with the increased prices of SUV, having said that, the impact on our sales growth of MPV, Toyota Innova would be humungous.”
While commenting on the current Budget, Joginder Singh, President and Managing Director of Ford India said, “We welcome the focus on infrastructure development, social benefits for inclusive and sustainable growth in the country. The investment allowance to boost the manufacturing sector is a positive move. 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 increase in the excise duty for SUVs.”
Executive Director of RSM Astute Consulting Group, K H Viswanathan commented, “The decision to increase customs duty on high end passenger cars and other motor vehicles with CIF value exceeding US $ 40,000 and engine capacity exceeding 3000cc and Motorcycles with engine capacity of more than 800 CC from 75 per cent to 100 per cent is a measure to curtail imports and tax conspicuous consumption. While this will make these products expensive, in a way it will benefit Indian Automobile companies who are manufacturing and selling products in such segments.”
Leave a Reply