Budget impact: Private SUVs such as Scorpio, Duster and Safari become much more expensive

There’s some bad news for all of you planning to buy an SUV this year as they have just become more expensive after the Union Budget 2013. Let’s take a look at how the Union Budget impacts your decision to buy a car, especially if you are planning to buy an SUV.

Budget impact on SUV buyers

Finance Minister P Chidambaram has raised excise duty on SUVs that are non-taxi (which means all private SUVs) from 27% to 30%, an effective increase of 3% on the ex-showroom price of the vehicle. This means vehicles like the Renault Duster, Mahindra Scorpio, Tata Safari, XUV500, and others become just that little bit more expensive.

However, if these are registered as taxis they will continue to sell at present prices. In his Budget speech, Finance Minister P Chidambaram said private SUVs are increasingly taking up more space in cities and hence he has imposed this additional excise duty on them. Also read: Hot-selling cars and SUVs of 2012

How does this impact your purchase decision?

Now here’s the catch. If you were planning to buy a compact SUV such as the Ford EcoSport or Mahindra Quanto, you can breathe easy. There is no change in excise duty on these SUVs because they comply with the “small-car” rules of being under 4-metres in length and having engine capacities of under 1.5 litres. However, if you were planning to buy a Mahindra Scorpio, XUV500 or Renault Duster, prices will rise, these will be more expensive. That is, if companies don’t choose to absorb the entire hike in excise duty in their pricing.

The base Renault Duster petrol, for example, that currently has an ex-showroom price of Rs. 7.59 lakh in New Delhi, will now cost Rs. 7.92 lakh, an increase of about Rs. 23,000. However, the top-end Renault Duster diesel, which attracts a 24% excise duty, won’t get a hike, as it has an engine capacity of under 1500 cc. Also read:Most car prices increase in January

 

With such a price increase, Finance Minister Chidambaram has just given Ford a reason to cheer, as it now has more room to play with Ford EcoSport pricing, as its key rival, the Renault Duster has become more expensive.

Those of you looking at buying a Mahindra XUV500 will also see a significant price rise. The base Mahindra XUV500 W6 variant that has an ex-showroom price of Rs. 11.8 lakh in New Delhi will now cost Rs. 12.1 lakh ex-showroom New Delhi. The top-end W8 all-wheel drive variant will see its ex-showroom price go up by nearly Rs. 43,000 to Rs. 14.71 lakh, ex-showroom New Delhi. The finalized new price list from Mahindra will come on March 3, 2013. Also read: Carmakers threaten price increase to speed up buying decisions

Prices of the Mahindra Scorpio and Tata Safari Storme also go up by between Rs. 20,000 to Rs. 35,000 between variants.

In one fell swoop, Finance Minister Chidambaram has managed to squeeze out some extra revenue from buyers of SUVs – the only segment in the auto industry that was seeing tremendous growth (the segment grew nearly 56% last year, compared to a 2% decline in growth for cars). However, those looking at compact SUVs have managed to stay under the radar. And there won’t be any impact on prices of mid-size sedans. This move is also likely to impact vehicles such as the Mahindra Xylo, Chevrolet Tavera and Toyota Innova too, but will exempt the Ertiga as it has an engine below 1500 cc.

In other moves in the budget that impact cars, imported cars see a steep hike in import duty from 75% to 100%, which will make luxury cars far more expensive. Motorcycles over 800cc also see a hike in excise duty from 60% to 75%, while electric cars and hybrids enjoy duty exemptions up to 2015. Also read: Budget impact: Some BMWs and Audis spared hike

So if you were planning to buy an SUV, it’s probably too late as these taxes come into effect,  immediately.