Car manufacturers had recently announced a cut in their car prices to pass the benefit of reduced excise duty to their customers. The immediate cut in car prices may now be followed by an immediate rise in the car prices.
Some of the states like Andhra Pradesh, Gujarat, Kerala, Maharashra, Tamil Nadu and, Karnataka have increased their local-level taxes, which in turn had increased the car prices. Following these states, government in Delhi, Himachal Pradesh, Punjab, and Rajasthan is also deciding to increase their state taxes which would offset the benefit of lower excise duty rates. As a result, prices of cars may again rise up by Rs 5,000 to Rs 25,000 depending on the car models and variants.
Potential car customers have been greatly influenced by these recent changes in the car prices especially the ones who are looking forward to buy small cars. It is believed that the reduction in car prices in response to the excise relief was lower than the estimated price hike due to higher state taxes.
Jnaneshwar Sen, India Vice-President (sales & marketing) of Honda Siel Cars, said “The relief in excise duty from the Central government will offset some of the burden of the states levies. If more states increase taxes, the industry may lose the benefit of recent price cut.”
Indian car market is already pressurized with the tight credit crunch, falling economy, and waning car consumers. It’s difficult to say how the car market would cope up with the future challenges that are on its way.