With the excise duty getting reduced from 10% to 8%, commercial vehicles (CVs) are set to become cheaper and this would be the second reduction in price, the first been done in December after the government reduced the Cenvat by 4% across the board. The commercial vehicle segment has been among the worst hit sector due to the ongoing slowdown.
?The 2% reduction in excise duty on commercial vehicles on Tuesday and consequently the cumulative 6% reduction that has been made since December, will make a positive impact on the demand for commercial vehicles and influence the purchase decision of buyers who were so far sitting on the fence as the company has decided to pass on the benefit to the customer in a day or two,? said Siddhartha Lal, managing director and CEO, Eicher Motors, adding that it will also boost the overall consumer sentiment.
In December the government had reduced the excise duty on commercial vehicles from 14% to 10% following which all commercial vehicle manufacturers had passed on the benefit to the customers. Consequently sales had picked up slightly in January though the cumulative sales of the segment continue to be negative.
According to the Society of Indian Automobile Manufacturers (Siam), sales of CVs declined by 19.83% between April-January at 3,11,283 units as against 3,88,294 units in the corresponding period of the last financial year.
?The high interest rates, high fuel prices and lower freight demand in the recent past had pushed the operational costs to higher levels, thus impacting the CV segment, not just in India but across the globe. However, the three stimulus packages announced by the government in December, January and now February and the subsequent reduction in prices of commercial vehicles will help the economy in general,? says Dilip Chenoy, director general, Siam, adding that even three wheelers (goods carrier) will see some reduction in prices.
According to Chenoy, small cars, two-wheelers and electric vehicles will also benefit, though indirectly, from the government?s announcement on Tuesday. ?The excise duty on components has come down from 10% to 8% and this has ended the inverted duty structure that was existing on the above categories. This will ease cash flow problem and will indirectly boost demand,? Chenoy adds.
Tyre manufacturer Ceat Ltd, in fact announced another round of reduction in the prices of its truck tyres, thus passing on to the customers the entire benefit of the 2% excise duty reduction. This is the third round of price cuts announced by Ceat within a span of three months. The new prices will be effective all India with immediate affect, the company said in a statement. Arnab Banerjee, VP ? marketing and sales Ceat Ltd said, ?Ceat?s decision to further reduce the cost of its tyres is part of the company?s belief of giving optimum benefit to its consumers?.
However, there would be no change in prices of smaller and bigger cars as the two categories currently attract the excise duty of 8% and 20% respectively, which remains unchanged.
Road to recovery
• There will be no change in prices of smaller and bigger cars as the two categories attract the excise duty of 8% and 20%, respectively, which remains unchanged
• However, these segments will benefit though indirectly. The excise duty on components has come down from 10% to 8% and this has ended the inverted duty structure that was existing on the above categories, which will ease cash flow problem and will indirectly boost demand
• In December the government had reduced the excise duty on commercial vehicles from 14% to 10% following which all commercial vehicle manufacturers had passed on the benefit to the customers
• Sales had picked up slightly in January though the cumulative sales of the segment continue to be negative