Post GST implementation from July 1, OEMs have cut prices of two-wheelers and small cars by 0-2% and of larger cars by 1-8%, ex-showroom Delhi and higher in other locations particularly those with high entry taxes. While this has led to equalisation of prices across areas, road tax remains a lever that states could still use. Hybrid vehicles have seen sharp price increases of 10% leading to adverse price movement vs. competing diesel models.
Taxes on most segments of two-wheelers and passenger vehicles have been either kept flat or cut under the new GST regime, which became effective from July 1, 2017. While effective taxes (GST plus cess) on 2-wheelers and small cars where taxes have been reduced by anywhere between 4 to 11%. Taxes for pure electric vehicles have also been cut sharply by 8% to 12%. The exception is hybrid vehicles, where taxes have been raised by 13% to 43%. As expected, the range of ex-showroom prices for 2-wheelers and passenger vehicles has narrowed post GST. The decline in prices has been particularly sharp in locations where there was an entry tax such as in Mumbai and Indore.
However, road taxes which are charged over and above the ex-showroom price at the time of registration of vehicles still remain a lever for states to charge differential rates – for instance Maharashtra government has increased road taxes by 2% to offset the losses on account of elimination of entry taxes and other states could follow suit – changes in road taxes will be key to watch out for, over the next few months.
Our own channel checks post GST implementation have indicated price cuts of 0% to 2% for 2-wheelers and smaller cars and 1% to 8% for larger passenger vehicles, ex-showroom Delhi as most OEMs appear to have passed on at least part of the GST benefit. As expected, price cuts have been highest in areas with entry-taxes such as Mumbai where cuts have been in the range of 5-10%. Across models, Maruti appears to have taken slightly lower price cuts relative to other OEMs.
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In fact, our dealer checks indicated discounts have also reduced in July for Maruti’s entry level models such as Alto K10, WagonR and Celerio and has increased only for Swift. On the other hand, M&M appears to have increased discounts on XUV500 and Scorpio while cutting discounts in Bolero Power Plus.