Car makers in the country have begun to slash prices on large cars/utility vehicles with engine capacity of 2000cc and above following the reduction of excise duty from Rs 20,000 to Rs 15,000 in the Budget. The industry had been looking at scrapping of the additional excise duty levied by the government on large cars as they were not doing well.

VG Ramakrishnan, director, automotive & transportation, Frost and Sullivan, South Asia and Middle East, said: “The additional excise duty levied by the government on large cars over 1500 cc has not done anything for the segment. Rather, premium car makers have been affected immensely because of this, and hence, the duty should have been scrapped.” Abdul Majeed, auto analyst and partner, PricewaterhouseCoopers (PwC), said: “There is a huge gap in the excise duties on small and large cars. The need is to levy duty not on the basis of size, but on the fuel efficiency.”

In June last year, the government had announced additional excise duty over and above the 24% on large cars/utility vehicles. The government had introduced a specific rate of excise duty of Rs 15,000 on large cars/utility vehicles with engine capacity of 1500-1999 cc and Rs 20,000 on cars with engine capacity of 2000 cc and above.

Indicating that the bright side of the Budget is that the stimulus packages remained, Jnaneswar Sen, senior GM-marketing, Honda Siel Cars India, said: “We will definitely pass on the full benefit to customers, with reduction of Rs 5,000 on Accord and CR-V.” The new prices of Accord and CR-V will be in the range of Rs 17.67 lakh to Rs 23.57 lakh (ex-showroom New Delhi).

Though the manufacturers see this as a small excise cut, they believe that times are of cherishing small gains. Tim Tucker, vice president, sales, Ford India, said, ”The additional duty reduction has been a welcome step taken by the government though the reduction is limited only to large cars. We are pleased to pass the benefit of the reduction on the Endeavour to consumers in entirety.” Ford India has also announced a reduction in the price of its SUV-Endeavour-by Rs 6,000. The price reduction will be applicable to all three variants of the car. The base model (2.5 litre) of the Endeavour will now be available at Rs 15, 01,000 (ex-showroom New Delhi). Endeavour is available in two other variants-2.5L XLT and the 3.0L Thunder Plus.

Hindustan Motors has reduced prices by Rs 6,000 on its SUVs including Pajero, Outlander and Montero with effect from July 7, 2009. The new ex-showroom India prices of three cars are Rs 20.64 lakh, Rs.20.69 lakh and Rs.41.88 lakh, respectively. General Motors has also slashed prices by Rs 5,600 on its Tavera with effect from July 7.

Toyota Kirloskar Motors too plans to pass on the full benefit to customers of the excise cut across its range. The company sells New Land Cruiser, Corolla Altis, New Camry, Innova and Prado in the country.

Other companies including BMW, Audi, Mercedes-Benz, Tata Motors, Mahindra & Mahindra (M&M), Skoda and Volkswagen (VW) till Tuesday late evening had not made any announcements yet.