Automobile industry fumes as Budget 2013 turns SUVs, imported cars costlier

Feb 28 2013, 19:26 IST
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SUVs and imported luxury cars will be costlier by up to Rs 15 lakh, courtesy Budget. (AP) SUVs and imported luxury cars will be costlier by up to Rs 15 lakh, courtesy Budget. (AP)
SummarySUVs and imported luxury cars will be costlier by up to Rs 15 lakh, courtesy Budget.

Sports utility vehicles (SUVs) and imported luxury automobiles will be costlier by up to Rs 15 lakh, with Finance Minister P Chidambaram today proposing to hike both excise and customs duties on these products.

Excise duty on SUVs has been increased to 30 per cent from 27 per cent, while all luxury vehicles will attract 100 per cent import duty as against 75 per cent earlier. Also, the basic customs duty on motorcycle with engine capacity of 800cc or more is being increased from 60 per cent to 75 per cent.

"This is not a good Budget for the automobile industry. With duty hikes, all manufacturers will pass on the burden to consumers and this will further dampen the ongoing sluggish sales," Toyota Kirloskar Motor (TKM) Deputy Managing Director and COO (Marketing and Commercial) Sandeep Singh told PTI.

If sales fall drastically, people may even lose jobs, particularly at dealers' end, in future, he added.

"TKM will pass on the entire burden to consumers. The excise hike will affect our multi-utility vehicle Innova and SUV Fortuner, while the hike in customs duty will make our Land Cruiser and Prado costlier," Singh said.

Although the company is yet to finalise the exact amount, it will be a hike of Rs 30,000-50,000 for Innova, he added.

"The Fortuner will be costlier by Rs 60,000-75,000. Similarly, Prado's price will go up by Rs 10-12 lakh. We will also raise the price of Land Cruiser by around Rs 15 lakh," Singh said.

Expressing similar sentiments, General Motors India President and MD Lowell Paddock said the Budget did not meet expectations as far as the automotive industry is concerned.

"We were expecting the roll back of the excise duty imposed last year... These hikes are not on the expected lines and will impact the sale of SUVs," he added.

Ford India President and MD Joginder Singh said the company is disappointed with the Budget as there is very little to boost consumer confidence and revive growth.

"It is a missed opportunity to introduce measures that would have revived industrial growth significantly. As we all know the automotive industry has been going through very challenging times, we are disappointed with the increase in the excise duty for SUVs," he added.

Two-wheeler maker Suzuki Motorcycle India Vice President (Sales and Marketing) Atul Gupta said the company will not raise the prices of its imported super bikes like Hayabusa.

"While the raise in customs duty is not helpful, we do not envisage a significant impact on the demand in the 800 cc above category. As of now, we will not increase the price of Suzuki superbikes. Given the considerations that go into the purchase of a superbike, we do not foresee a significant change in market size or demand patterns," he added.

Finance Minister P Chidambaram today proposed to hike the basic customs duty to 100 per cent from 75 per cent earlier on luxury vehicles with prices over USD 40,000 and engine capacity exceeding 3,000 cc for petrol and 2,500 cc for diesel options.

While presenting the Budget, he said: "SUVs occupy greater road and parking space and ought to bear a higher tax. I propose to increase the excise duty on SUVs from 27 per cent to 30 per cent. However, the increase will not apply to SUVs registered as taxis."

On the import duty hike on luxury vehicles, he said the affluent class in India consumes imported luxury goods such as high-end motor vehicles, motorcycles, yachts and similar vessels, he expressed confidence that "they will not mind paying a little more".

He also proposed to hike the import duty on motorcycles with engine capacity of 800 cc or more to 75 per cent.

However, excise duty on truck chassis is proposed to go down to 13 per cent from 14 per cent.

To boost manufacturing of environment-friendly vehicles, Chidambaram proposed to continue and extend the currently available concessions on specified parts of electric and hybrid vehicles till March 31, 2015.

In Budget for 2012-13, the excise duty on specified parts of hybrid vehicles was reduced to 6 per cent from 10 per cent.

Excise duty on lithium ion battery packs for electric or hybrid vehicles was also cut to 6 per cent from 10 per cent.

Besides, the full exemption from basic customs duty and special CVD with concessional excise duty or CVD of 6 per cent on some parts of hybrid vehicles was extended to specified additional items and lithium ion batteries imported to make battery packs for electric or hybrid vehicle.

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