With the announcement of an infrastructure cess of up to 4% on cars of varying sizes, auto firms on Tuesday started hiking prices by building in the cess. Tata Motors was the first to announce increase in the prices of its products on Tuesday while other manufacturers like Maruti Suzuki, M&M and Hyundai are expected to do the same soon.
Tata Motors hiked the prices of passenger vehicles from Rs 2,000 to Rs 35,000. “In line with the cess levies from the Budget announcement, we are increasing the prices of our passenger vehicles with immediate effect,” a Tata Motors spokesperson said.
On Monday, Hyundai Motor India had said that it plans to hike vehicle prices ranging from Rs 3,000 on entry-level small car Eon to Rs 80,000 on SUV SantaFe, which are priced between Rs 3.20 lakh and Rs 30.79 lakh.
Honda Cars India also plans to raise prices in a range of R4,000 to R80,000. The company sells six models from entry-level Brio to premium SUV CR-V, priced between R4.27 lakh and R25.23 lakh (all prices ex-showroom Delhi).
While presenting the Union Budget on Monday, the finance minister levied a 1% infrastructure tax on petrol and CNG cars, 2.5% on diesel vehicles and 4% on bigger cars like SUVs.
R C Bhargava, chairman, Maruti Suzuki said, “Vehicles are expected to become more expensive due to the infra cess and the manufacturers can afford to absorb it once the demand situation improves especially in the rural market.”
Puneet Gupta, associate director, IHS said, “It is a setback for the industry. Car makers have been trying to recover lost ground and such steep hike in taxes is not sustainable and they will pass it on to the customers.”
M&M which mostly sells diesel vehicles barring the newly launched KUV 100 is the most severely affected as most its products will not only be subjected to the 2.5% and 4% infra cess on diesel and large vehicles but also an additional luxury tax of 1% will be added to the prices of vehicles priced above R10 lakh.