Double whammy for auto buyers

Pay more from April for vehicles following BS-IV emission norms.

After the Budget triggered a price increase in all models of automobiles, prospective buyers will be in for another jolt, as the industry is set to jack it up again in April due to the implementation of the new emission norms — Bharat Stage (BS) IV.

Following the 2-per cent increase in excise duty on all non-oil products to 10 per cent from 8 per cent, auto players have already announced price hikes of up to Rs 70,000.

Come April, the industry will see another round of price rise as auto companies will pass on the cost incurred on upgrading to new emission norms of BS IV in 13 cities and BS-III in the rest of the country.

“There will be another round of price hike by the industry in April. It is a matter of concern but necessary because of the upgrade due to new emission norms,” said Mahindra & Mahindra President for automotive sector Pawan Goenka, who is also the president of Society of Indian Automobile Manufacturers (Siam).

Goenka said the April price rise “will be roughly of the order of the hike now due to excise duty increase”.

Soon after Finance Minister Pranab Mukherjee announced increase in excise duty in his Budget proposals for the FY11 yesterday, almost all auto-makers said they would pass on the burden to consumers with immediate effect.

While the country’s largest car maker Maruti Suzuki hiked prices of its models by Rs 3,000 to 13,000 (ex-showroom, Delhi), rival Hyundai increased the prices between Rs 6,500 and Rs 25,000.

Siam, however, said the 2-per cent rise in excise duty should not have a very adverse impact on the industry.

“The 2-percentage points hike in excise duty was expected and should not have adverse impact on the market,” Goenka said, adding the Budget has resulted in the convergence of the basic excise duty rate and service tax rates to 10 per cent, indicating a move to enable GST implementation from April 2011.

Tata Motors also hiked prices of its vehicles by up to Rs 60,000-70,000 for heavy vehicles and Rs 5,000-6,000 for smaller vehicles.

Honda cars are now costlier between Rs 13,000 and Rs 41,000 and that of General Motors by Rs 6,200-22,000 across all models. Italian car maker Fiat increased prices of its models by Rs 7,000-15,000.

Ford India President and Managing Director Michael Boneham said the excise hike was a major disappointment for the industry as there is a strong need to continue the stimulus to support the ongoing fragile recovery.

“This is sure to affect consumer sentiments when taken with the simultaneous hike in fuel prices as it will lead to an overall slowdown in auto ownership,” he said.