Snapshot: The 2014 Interim Union Budget comes as a breath of relief for the auto sector in India, which is embattled with slowing sales. The Finance Minister of India, Mr P. Chidambaram, has reduced excise duty on cars and two wheelers. However, the catch in this excise duty reduction is that the lower duty is applicable only until June 20th, 2014, after which the new government will take a call on whether to continue with the sops or to do away with them. Notably, India goes to general elections in May 2014.
The excise duty on small cars (with lengths measuring under 4 meters), motorcycles and scooters has been reduced from 12 % to 8 % while that on mid and large cars has come down from 24 % to 20 %. SUVs, which bore the brunt of the excise duty rise during the last union budget, also see a reduction in excise duty, from 30 % to 24 %. All in all, prices across the automobile sector are likely to go down in the coming days as car and two wheeler makers pass on the reduction in excise duty to buyers.
However, it remains to be seen whether the reduction in excise duty and the subsequent fall in car and two wheeler prices do anything to boost vehicle volumes in India considering the fact that the economic sentiment isn’t very positive at the moment. Increased spending on vehicle purchases especially in the MUV and SUV segments, in view of the upcoming general elections is expected to do its bit to boost sales.
A leading auto industry voice and the Head of Automotive at Mahindra & Mahindra, Dr Pawan Goenka, has come out with a positive comment about the excise duty cut with the following statement,
Auto industry to get a boost from excise duty cut.
Expect more such positive comments from auto industry stalwarts as the news of the excise duty cut through the 2014 Interim Union Budget sinks in. Vehicle buyers in India can look forward to price cuts being announced in the next 48 hours.