The Nano fear seems to have begun to creep into the minds of two-wheeler manufacturers. In a post-Budget meeting with the finance minister on Monday, the biggies of?two-wheeler industry, Hero Honda and Bajaj Auto, requested for a further reduction in excise duty on two-wheelers from 12% as announced in the Budget to 8%, for a level-playing field with small-car manufacturers.
The industry fears that Tata’s Nano, earlier priced at Rs 1 lakh, would now be available at a lower price and hence impact the sales of two-wheelers. “Two-wheelers are used by real aam admi (common man),” Pawan Munjal, managing director, Hero Honda said while making a case for lower excise duty on two-wheelers.
“The excise duty on two-wheelers and three-wheelers should be brought down to 8%,” Rahul Bajaj, chairman of Bajaj Auto added.
According to an industry expert, “Tata Nano, slated for a launch in October, would now fall under the 12% excise duty announced for small cars and this might result?in dropping of prices?of Nano. This would be in line with a similar reduction announced by various car manufacturers immediately after the Budget and would make the executive and premium bikes even less-price competitive vis-a vis Nano”. Assuring the industry that he would keep a close watch on developments in the auto sector, finance minister, P Chidambaram said he had kept the duties at the same level for auto and small cars “as they enjoyed the same duty in the last two-three years”. “Reduction in duty would help gain some volume but the phenomenon will be short-lived unless the issue of retail financing as well as high interest rates is considered,” adds Atul Gupta, vice president (sales and marketing), Suzuki Motorcycle India Pvt Ltd.
The two-wheeler industry, especially motorcycles have been losing steam ever since December 2006, which was followed by a series of interest rate hike. According the Society of Indian Automobile Manufacturers, the cumulative sales of motorcycles during April-December was down by 12.43% to 48,36,908 units as compared to 55,23,661 units sold during the same period last year. This is contrary to a double-digit positive growth of 16.37% for compact cars at 7,04,172 units during this period.
In its pre-Budget memorandum, the two-wheeler industry had asked the government to bring down the excise duty on two-wheelers from 16% to 8%. However, now that the duty has been reduced to some extent, it still continues to be the same as that on small cars, the industry wants the government to reconsider their demand of reducing the excise duty to half before the Budget proposals go to Parliament for approval.
