Luxury cars, SUVs to cost more

25% customs duty hike on luxury cars could see a hike of Rs 25 lakh to Rs 1 cr after imposition of additional local levies

Cost of imported luxury cars and superbikes and sports utility vehicles that are made in India are expected to go up with the Finance Minister proposing to increase the tax burden on them.

Automobile companies such as BMW, Audi and Mercedes-Benz and a range of performance and super car making companies which import large vehicles for sale in India will be charged an additional 25 per cent on such vehicles.

The customs duty on engine capacity exceeding 3000cc for petrol run vehicles and exceeding 2500 cc for diesel run vehicles in being increased to 100 per cent from 75 per cent. This will likely translate into a hike of anywhere between Rs 25 lakh to nearly Rs 1 crore (in the case of cars such as Rolls Royce Ghost), after the imposition of additional local levies.

Accordingly customs duty on motorcycle with engine capacity of 800cc or more being increased to 75 per cent from 60 per cent. Product prices of US-based premium bike maker Harley Davidson and some imported models of Honda, Yamaha and Suzuki is all set to get dearer.

Atul Gupta, VP Sales and Marketing, Suzuki Motorcycle India, said, “While the raise in customs duty is not helpful, we do not envisage a significant impact on the demand in the 800-cc above category. As of now, we will not increase the price of Suzuki superbikes. Given the considerations that go into the purchase of a superbike, we do not foresee a significant change in market size or demand patterns.”

Swanky cars and other luxury vehicles has been the favourite target of the Finance Minister. In the last year's budget customs duty of the same segment of cars was raised to 75 per cent from 60 per cent, which resulted in an upward revision of Rs 20-40 lakh on Ferrari, Aston Martin, Lamborghini and Rolls Royce models.

Suhas Kadlaskar, Director (Corporate Affairs), Mercedes-Benz India, said, "This is not all positive for the auto industry. It would be counter productive for industry going through a bad phase". Mercedes and Audi will pass on the hike to the customers.

Sports utility vehicles, which have been labelled as fuel guzzlers, have seen a 3 per cent rise in excise duty in this budget. The excise duty on them has been increased to 30 per cent from 27 per cent. However, those SUVs registered as taxis will not have to bear the additional tax burden.

Mumbai-based SUV market leader Mahindra & Mahindra, will suffer the biggest impact of this increase. Prices of country's top-selling SUVs like Mahindra XUV500 and Scorpio, Renault Duster, Toyota Fortuner will be revised upwards. Last year too there was an increase in excise duty on all models bigger than four meters.

Joginder Singh, president and managing director, Ford India said, “As we all know the automotive industry has been going through very challenging times, we are disappointed with the increase in the excise duty for SUVs.”

The entire utility vehicle basket is the only segment reporting a robust growth presently despite a downward trend in sales of cars. In the April-January period the segment saw a growth of 57 per cent with sales of more than 450,000 units.  

Those compact SUVs with small engines and less than four meters in length, many of which by Maruti Suzuki, Mahindra & Mahindra, Ford, Honda and Tata Motors are lined up for launches, will not be impacted by this increase.

Additional taxes are expected to further put pressure on the envisaged growth of passenger vehicles which was down to 6.8 per cent during April-January period this year to 2.20 million units. Industry body SIAM is expecting 0-1 per cent growth for this year.

Further, the government has proposed to buy 10,000 additional buses under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) which is being continued in the 12th Plan. Out of the proposed Rs 14,873 crore provided for JNNURM a significant portion will be used to purchase buses used especially in the hill states.

Mumbai-based Tata Motors and bus market leader Ashok Leyland will likely be the biggest beneficiaries of this purchase order. During 2009-12 the government sanctioned the purchase of 14,000 buses under this scheme. GUNNING FOR FUEL GUZZLERS

• EXCISE DUTY on SUVs, which have been labelled as fuel guzzlers, has been raised by 3%
• CUSTOMS DUTY on engine capacity exceeding 3,000cc for petrol-run vehicles and more than 2,500cc for diesel-run ones has been raised from 75-100 %
• MAHINDRA & MAHINDRA, the Mumbai-based SUV maker and market leader will suffer the most
• COMPACT SUVs  by Maruti Suzuki, Mahindra & Mahindra, Ford, Honda and Tata Motors will not be impacted by this increase
• ADDITIONAL TAXES are expected to put further pressure on the envisaged growth of passenger vehicles