Govt's decision not to extend excise relief will affect prices: car makers

Companies says the burden will be passed on to the customers

Auto majors say car prices will rise after the government failed to extend excise relief for car manufacturers.

They say they have no option but to pass on the additional burden to customers.

"Nissan has passed on 100% of earlier excise duty benefits to the customers. Government's decision not to extend excise relief will have a definite effect on prices. The auto industry has just come on to the road to recovery and this will have a negative impact," said Arun Malhotra, MD, Nissan Motor India Pvt Ltd.

Ford India's spokesperson said that the company will pass on the excise duty hike to the customers and it is currently evaluating the quantum of the hike.

When the government reduced the excise duty, Ford passed on the benefit to the customer, by reducing the price between Rs 35,000 and Rs 1.5 lakh, depending on the products and variants. Now the impending excise hike will be passed on to the customers, said the spokesperson, adding that like other OEMs, Ford was also expecting that the government to extend excise duty cuts until the next budget. 

"The sector has just started recovering, we still require government's support," said the spokesperson.

Ford India clocked total sales of 11,630 vehicles (domestic and exports) compared to 14,935 vehicles sold in the corresponding month last year. 

The finance ministry has decided not to extend excise duty cuts on automobiles and consumer durables beyond Wednesday, December 31.

The interim Budget of former finance minister P Chidambaram had reduced the excise duty on small cars, scooters, motorcycles and commercial vehicles to 8% from 12%. For sports utility vehicles, it was cut to 24% from 30%. For mid-sized cars, it was reduced to 20% from 24% and for large cars from 27% to 24%.

In October, car sales had declined for the second month in a row, on an annual basis, by 2.6% to 159,000 units, despite the festival season, according to the Society of Indian Automobile Manufacturers (Siam). Motorcycle sales were down 8.7% to 10,08,761 units.

In November, however, there was a rise in car sales. They increased 9.5% to 156,000 units on a yearly basis. However, the decline in motorcycle sales continued, falling 3% to 853,000 units from 880,078 a year earlier, said Siam.