Excise on big cars may soon be down to 16%

New Delhi, Oct 7: Domestic car makers may soon have a big reason to cheer. The current slowdown in the automobile industry triggered by high interest rates against loans may prompt the government to cut excise duty on big cars by 8% and bring it on a par with that on small cars at 16%.

If that happens, the prices of the Honda City, the Suzuki SX4 or the Toyota Corolla may drop significantly.

According to official sources, the government is “seriously considering” the long overdue demand of car makers to reduce excise duties on big cars from 24% to 16%, a sop it had offered only for small cars in the Budget in February.

The sources said the ministry of heavy industries had made a strong case for a cut in excise on big cars to 16%, making it uniform for the entire car industry.

“We expect the finance ministry to take a very serious view of the demand as the car industry, especially the mid-size cars, are in the grip of a slowdown,” the sources said.

The idea has been welcomed by the auto industry that said such a step was required to lift its morale. Car makers said they were somehow managing to maintain growth with discounts and some recent launches.

“It is a good move and something that we need desperately. I am sure it would help boost the numbers that have been subdued following the recent increase in interest rates,” Atsushi Toyoshima, managing director of Toyota’s India subsidiary, told FE.

He said the diverse duty structure in the industry, where pre-defined small cars of a particular engine size and length enjoyed a lower duty than big cars, was an “anomaly” that needed correction.

Asked whether an excise cut would make cars cheaper, Atsushi said, “Definitely.” Agreed Jnaneswar Sen, senior general manager of marketing at Honda Siel India. Sen said the step would help push demand and boost the market and sentiments. He said the mid-size car segment had not been faring well and a step like this would help increase sales.