Recently government levied 3% extra excise duty on sports utility vehicles which are above 4-metre length, 1500 cc engine capacity with 170 mm. To avoid the increased tax on new SUV cars, Mahindra & Mahindra has plans to modify some of its vehicles to meet the three vital criteria: Less than 4-metre, below 1.5 litre engine capacity and lesser than 170 mm.
Government has raised the excise duty from 27% to 30% on SUVs this year. Pawan Goenka, president at M&M told "Such changes in policy also affects our product planning. We will do whatever possible to try to get back to 27 per cent excise bracket." The increased 3% tax on excise duty has hit Mahindra hard. Only Quanto and few variants of Xylo have stayed out of the higher excise duty tax. The top-selling suvs - Bolero, Scorpio and XUV 500, comes under the new tax bracket. After the tax hike, Mahindra sales volumes increased only by 2% in April 2013.
The modifications of Mahindra SUVs will take 1-2 year time. So Mahindra is trying to adapt the existing engines and lower ground clearance which is likely to take lesser time. At present, most of its SUVs come with more than 2100 cc engine capacity.
Pravin Shah, chief executive, automotive sector, at M&M, told, "While making changes we have to see that it does not impact performance, and yet meets the requirements." The modified versions may be underpowered. "The 1500cc engine could be underpowered. So, we don't want to do a product that will satisfy the excise requirement but not satisfy customer requirements. So, while there are enough competitive pressures there is this unnecessary taxation pressure too", said Goenka.