FM P. Chidambaram's Budget 2014 effect: Auto majors Tata Motors, Audi, General Motors to cut car prices

Written by PTI | New Delhi | Updated: Feb 18 2014, 00:03am hrs
Tata MotorsTata Motors will pass on the benefits of excise duty reductions in Budget 2014 to the consumers from tomorrow.
After Finance Minister P. Chidambaram decided to reduce excise duty on automobiles in the interim Budget 2014-15, auto makers Tata Motors and General Motors India today announced they will cut prices of their products.

"We will definitely pass on the benefits of these excise duty reductions to the consumers for our new dispatches from tomorrow (as applicable) and are working on the details of the exact reductions," a Tata Motors spokesperson said.

Interim Budget 2014-15: Read full speech of P. Chidambaram

The various cuts across the different categories of passenger and commercial vehicles is a very positive step as these will make the vehicles more affordable to the consumers as well as the transporters, she added.

"GM India will pass on the excise duty relief to its consumers and is currently studying the fine print to determine the exact amount across its car lines," General Motors India Vice- President P Balendran said.

Earlier in the day, P. Chidambaram announced cut in excise duty across various segments of automobiles in order to give a boost to the industry that has been on a prolonged slump.

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.

Excise duty on large cars will now be 24 per cent compared with 27 per cent earlier, while the duty on mid-sized cars will go down to 20 per cent from 24 per cent previously. The excise duty cut will be applicable up to June 20, 2014.

Reacting to the announcement, market leader Maruti Suzuki India MD and CEO K Ayukawa said the Finance Minister's announcement was a much needed initiative.

"We hope it will revive sentiment, and encourage people to buy automobiles. With passenger vehicle industry in negative zone this year, this was a much needed step," he added.

Society of Indian Automobile Manufacturers (SIAM) President Vikram Kirloskar said the reduction in excise duty would reduce price thereby making vehicles more affordable which would improve the consumer sentiment and hopefully revive the demand for vehicles.

"This could hopefully herald a revival of the manufacturing sector in the days to come," he added.

Honda cars India Sr Vice President - Marketing and Sales, Jnaneswar Sen, termed the interim budget positive for the auto sector with across the board excise duty cuts.

"These reductions will propel demand in the coming months and anchor support for a better first quarter. It will give a much needed boost to the industry as it looks to recover from the ongoing slow down," he added.

General Motors India's Balendran said the excise duty cut is encouraging news but it is only for a short term as the proposals would require endorsement from the new government.

"The demand sentiment will only pick up after the new government upholds these announcements. In the meantime, the proposals to cut excise duty on SUVs and small cars and large diesel cars is a welcome step" he added.

"These announcements are positive and should help the auto industry witness some turnaround. Mahindra welcomes the reduction in excise duty in automobiles across the product range including the SUVs," Mahindra & Mahindra (M&M) Chief Executive, Automotive Division, Pravin Shah said.

M&M Executive Director & President Pawan Goenka said that if the initiatives are maintained in the final FY15 budget, it should provide a much needed stimulus for overall manufacturing sector in India.

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

According to the SIAM, domestic car sales last year fell to 18,07,011 units from 19,98,703 units in the previous year.

The slump continued in January as car sales fell for the fourth straight month with a decline of 7.59 per cent to 1,60,289 units from the same period a year earlier.

Commenting on the development, Hyundai Motor India Ltd (HMIL) Managing Director and CEO B S Seo said the excise duty cuts announced in the current budget has come as a breather to the struggling auto industry.

"This duty cut will make the cars more affordable since the benefit will be passed on to the consumers immediately," he added.

Deloitte Touche Tohmatsu India Senior Director Kumar Kandaswami said any reduction in vehicle prices is welcome in a difficult market.

"This will particularly make the borderline customers those that are choosing between a used car or a new one or between segments or between a two-wheeler and a car-to make a decision in favour of a car or to look for a higher segment," he added.

The fact that the rate cut applies to the SUVs is significant, Kandaswami said.

"The SUVs have been given the benefit possibly because of the fact that diesel will eventually get sold at market prices and the additional burden that was imposed on the SUVs in the recent past is sought to be removed," he added.

German luxury car maker Audi today reduced prices of its five models by up to Rs 3.82 lakh after Finance Minister P. Chidambaram decided to reduce excise duty on automobiles in the interim Budget 2014-15.

The higher version of the premium sports utility (SUV)Q7 will be cheaper by Rs 3.82 lakh at Rs 78.28 lakh from the earlier price of Rs 82.11 lakh, Audi said in a statement.

The base version of Q7 would be retailed at Rs 58.34 lakh, a cut of Rs 2.84 lakh, from Rs 61.19 lakh earlier.

The company has reduced the price of SUV Q5 by Rs 2.22 lakh at Rs 45.72 lakh from Rs 47.95 earlier.

The German firm has reduced price of base version of its luxury sedan A4 by Rs 72,000 at Rs 29.85 lakh, from Rs 30.58 lakh earlier.

The higher variant of the luxury sedan will be cheaper by Rs 90,000 at Rs 37.04 lakh, from Rs 37.94 lakh earlier.

Price reduction in fully built units (FBUs) like RS7, RS5, S6, TT and R8 is negligible, the company said.

Commenting on the excise duty cuts for vehicles, Nissan Motor India CFO Sunil Rekhi said the reduction in excise duty will reduce the acquisition price.

"Thus making the vehicles more affordable should improve the consumer sentiment and hopefully revive negative growth for vehicles," he added.

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