Interim budget 2014-15: Expect cheaper cars as auto industry gets excise relief

Finance Minister PC Chidambaram, in a relief to to car manufacturers, has slashed excise duties on passenger vehicles.

While tabling the interim  budget 2014-15 in Lok Sabha, the Union finance minister announced that excise duty on small cars have been slashed from 12 per cent to 8 per cent, while that on medium cars and SUVs have been reduced from 24 per cent to 20 per cent, and 30 per cent t0 24 per cent respectively.

During the past six months, all automobile manufacturers have hiked prices by around four per cent, citing increased input costs. This has further dented the car sales. The move should bring down prices of cars and SUVs, and should spur sales which have been sluggish over the past couple of years. It though remains to be seen if the vehicle manufacturers actually decide to pass on this benefits to the car buyer.

In Union Budget last year, Chidambaram had raised the excise duty on SUVs from 27 per cent to 30 per cent.

Comments from the automobile industry

Eberhard Kern, MD and CEO, Mercedes Benz India said.

"We welcome the Indian government's interim budget announcement to reduce duty on cars and SUVs and expect this to significantly boost the automobile industry. Mercedes-Benz shall pass on the best possible price benefit to our customers inspite of volatile foreign exchange movements."

Prices for the C-Class will come down from Rs 39.90 lakh to Rs 39.35 lakh

Prices for the E 250CDI will come down from Rs 47.66 lakh to Rs 46.90 lakh

Prices for the GL-Class will go down by two lakhs from the current price of Rs 74 lakh

Sunil Rekhi, CFO, Nissan Motor India Pvt Ltd on the Interim Budget 2014

It is a welcome move for the Economy, particularly for Auto sector which is looking for strong support from the Government for a growth stimulus as it is struggling with the negative growth for most part of this year. As Auto Sector is the backbone for economic growth in terms of huge employment provider, through its entire value chain starting from Tier N Vendors to end retail sector and related industries including Financial/Logistics/Services/Infrastructure.

We believe that this reduction in Excise Duty will reduce the acquisition price. Thus making the vehicles more affordable which should improve the consumer sentiment and hopefully revive negative growth for vehicles. Nissan customers will enjoy the benefit of the excise cut for its cars, Micra, Micra Active, Sunny, Terrano, Evalia and Teana models.

Shirish Kulkarni, chairman DSK Hyosung

"We at DSK Hyosung welcome this change which comes as a great relief to the Automobile Industry that has been suffering from negative growth. We will ensure that the benefits of reduction in excise duty from 12% - 8% are made available to our customers. We are sure relaxation on excise duty in this interim budget will foster and stimulate the growth in the entire automobile sector. Our concern lies in the fact that the duty shouldn't be changed post elections. This benefit has to be sustained until the entire automobile sector reflects a growth back to 12 % - 15% at least."

 President ACMA, Harish Lakshman

"We are glad that the Hon'ble Finance Minister, given the circumstances, has unveiled a pragmatic budget. ACMA welcomes reduction in Excise Duty on Vehicles – CVs, Small Cars and Two-Wheelers from 12% to 8%; on SUVs from 30% to 24% and on large and mid-sized cars from 27% to 24% and from 24% to 20% respectively. The automotive industry has been reeling under significant pressure for quite sometime now, the announcement on reduction in excise duty is timely and will help boost the sagging morale of the automotive sector. Further, the reduction in excise duty on Capital goods from 12% to 10% will stimulate the industry for higher investments in manufacturing.

Vikram Kirloskar, president, SIAM

We believe that this reduction in Excise Duty would reduce the acquisition price thereby making vehicles more affordable which would improve the consumer sentiment and hopefully revive the demand for vehicles, Mr. Kirloskar added. The Automotive industry is the engine of growth for the manufacturing sector as a whole as it supports key industries like auto-components, capital goods, raw materials, electronics, chemicals, plastics, software etc. Revived growth in the automotive industry would have significant positive impact on these key downstream and upstream manufacturing sectors that largely depend on the performance of the auto sector. This could hopefully herald a revival of the manufacturing sector in the days to come, Mr. Kirloskar said.