The much awaited 2012-13 Union Budget has been announced today and it is quite a mixed reaction for the auto industry. The tax hike on diesel vehicle has not been executed but the Government has increased excise duty on all size of cars, resulting in an expected price hike across all cars by the manufacturers in the coming days. The basic excise has been hiked to 12% from the current 10% (on sub 4-meter vehicles and bikes), while excise duty on large cars have been hiked to 24% from the current 22% (on vehicles having an engine capacity between 1200 – 1500 cc). But it only gets worse as you size of your car increases as large cars (above 1500 cc) will now attract 27% excise duty from the earlier 22% plus Rs. 15,000/- duty. CBU vehicles will not attract an excise duty of 75% from the earlier 60% (which translates into an effective rate of customs of 138%), which has been done to encourage local manufacturing. Expect superbikes to only become costlier.
All automakers have said they will be hiking prices of their cars with immediate effect, which would be in the range of Rs. 3000/- to 4,00,000/- (depending on the size and car). Imported components for manufacturing hybird and electric vehicles will not attract an duty to promote green vehicles. Customs duty on bicycles and parts have been increased while LNG has been exempted from customs duty. While diesel heads will be laughing, but the overall increase in car prices will be across the board, resulting in a further decline in the car market. The Government needs to be stable with the excise duty it imposes on cars, as such fluctuating policies will result in unfavourable environment for the automobile industry.
With immediate effect, small cars (hatchbacks) will now be costlier between Rs. 4000 – 20,000/- depending on the variant. While the impact will be more on larger vehicles. Cars like the S-Class will be costlier by Rs. 3,00,000/-, which might not make a significant change in the buying decision of a person spending close to Rs. 1 crore.
What do you think of the 2012-13 Union Budget for the auto industry?
