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Interim budget 2014: Cars, two-wheelers to cost less

Auto industry cheers as Chidambaram cuts excise duty

Published: Feb 16, 2014 02:18:25 PM IST
Updated: Feb 17, 2014 03:38:26 PM IST
Interim budget 2014: Cars, two-wheelers to cost less

The automobile industry has had a really rough time in the last 21 months. Annual car sales in the country declined for the first time in 11 years in 2013, posting a 9.59 percent dip. And while the two-wheeler industry registered a marginal growth of 5 percent, the commercial vehicles industry has been down in the dumps. But now, thanks to P Chidambaram, the Union Finance Minister, the industry has something to cheer about. Here are the goodies in this year’s Union Budget:

* Excise duty on small cars/two wheelers/scooters/ commercial vehicles has been cut from 12 percent to 8 percent
* Excise duty on SUVs has been cut from 30 percent to 24 percent
* Excise duty on mid and large cars has been cut from 27/24 percent to 24/20 percent
* There are also reductions on excise duty and chassis   

The duty cut brings down the sticker price, but, that apart, there is something for everyone too: From two-wheelers to cars to commercial vehicles. Who will be the key beneficiaries? Maruti Suzuki, Mahindra & Mahindra, Tata Motors, Ashok Leyland. Small cars as a segment has not been performing very well compared to the growth in sub-4 metre sedans and compact sports utility vehicles. "The stimulus on small cars and SUVs should help. It is good from the perspective of policy, but I am not sure if it will really impact sales that much. It will definitely add a little lift because this is like a promotion and promotions do help. But the fundamental problem is customer confidence and not vehicle price," says Rakesh Batra, partner at Ernst & Young.

For the last two years, the Society of Indian Automobile Manufacturers (SIAM) has been lobbying with Praful Patel, the heavy industries minister, that the auto sector deserves some stimulus. At the recently-concluded Auto Expo in New Delhi, Patel said, "It is very important that we have a stimulus package for the entire automobile industry. All segments of the industry are facing a slowdown. In some cases, even a reduction in production. So, this is not a happy sign. I am talking to the finance minister and have spoken to him and will be further meeting him over the next few days to seek what best we can do."

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