Auto News

Auto cos fear Budget may push up prices

By Motortrend India Staff   |   09 February,2010

The automobile industry fears that Budget 2010 may make cars, both big and small, more expensive by anything between Rs 2,000 and a lakh. According to top auto CEOs, the government may roll back part of the stimulus package that helped boost car and SUV sales through 2009-10. Also expected is an upward revision in service tax as well as a 2 per cent hike in Cenvat.

But the biggest price push could come if the Budget rolls back the 4 per cent duty cut on big cars. That would mean cars longer than 4 metre in length and with engine sizes larger than 1.2 litre in petrol and 1.5 litre in diesel could get dearer by Rs 12,000 to Rs 1 lakh depending on the price tag.

The stimulus package announced in December 2008 cut duty on small cars from 12 per cent to 8 per cent while prices of big cars came down from 24 per cent to 20 per cent. With the passenger vehicle market totting up 1.3 million units in domestic sales in the first 9 months of the fiscal at a healthy trot of around 23 per cent, the government could have a very good reason to roll back part of the auto package, said another top auto sector CEO.

Montek Singh Ahluwalia, deputy chairman of the Planning Commission, told that the stimulus packages have worked and the economy is on growth path so “ we should think of unwinding the stimulus now”.

But the stimulus package isn’ t the only bad news that the auto sector is worried about. The industry is also expecting service tax to be tweaked upwards by 1-2 per cent and an across the board Cenvat hike by 2 per cent to make small cars pricier by Rs 2,000-10,000. Two-wheelers too will be costlier by Rs 600-1,500 if Cenvat hike becomes a reality.

The industry is also apprehensive about the government cutting import duty on hybrid cars by 50% from the current levels of 60%. If it goes through it will make the soon-to-be-launched Toyota Prius hybrid cheaper but will be a dampener for local auto companies like Tata Motors and M&M that are developing indigenous hybrid technology.

Auto industry apex body Society of Indian Automobile Manufacturers (SIAM) has, in its budget recommendations, asked for a continuation of the stimulus package, reduction of duty differential between big and small cars and higher initial year depreciation for cars and two-wheelers.

The auto industry, however expects some relief from the budget in terms of a reduction in the specific excise duty applicable to cars and SUVs with engine size above 2,000 cc. Currently this category attracts a Rs 15,000 specific excise duty which could come down in this budget. Budget 2009 also cut this component from Rs 20,000 to Rs 15,000.

Source: The Economic Times

Related Content