Mahindra & Mahindra said higher excise duty on SUV by government is creating an uneven playing field between auto companies and changing the competitive scenario totally.
Mahindra & Mahindra President (Automotive and Farm Equipment Sectors) Pawan Goenka told PTI, "This (hike in excise) has also resulted in a situation where there is no level playing field between players in the industry as some of the best selling SUV models competing in the same price bracket do not come under the increased duty structure due to the specifications in the new definition of SUVs." He further added, "It totally changes the competitive scenario." The Finance Ministry has levied 30 percent excise duty on SUVs (earlier 27 percent) which are above 4-meter length, 1500 cc engine capacity with 170 mm.”
Bolero and most of Mahindra SUVs comes under the new taxation except Quanto. On the other hand, Renault’s Duster and Maruti’s Ertiga have escaped the new tax burden. "We still do not know why this was done. Why only the SUVs and within the SUVs also why only select SUVs? If this was a move against the affluent benefiting from subsidised diesel, then why only the SUVs? There are other more expensive diesel cars. No matter how we look at it, we are unable to understand it," Goenka told.
Commenting on the situation, Goenka said: "Our initial analysis shows that industry sales of SUVs, on which excise duty has been increased by 3 per cent, have gone down by 14 per cent in April this year compared to last year. This is opposite to the 24 per cent growth witnessed in the same month in 2012."
Increasing 3 percent excise duty will dampen the buying spirit of consumers. Already auto market is on its downward trend, with added tax burden it is likely to slip further.