Mahindra XUV at the 11th Auto Expo 2012

“SUVs occupy greater road and parking space and ought to bear a higher tax,” is Chidambaram’s point. The Finance Minister has proposed a excise duty hike of 3% for SUVs & MUVs, raising the excise duty from 27% to 30%. The Toyota Innova, Mahindra XUV, Tata Safari Storme and the likes should see a sticker price rise by anywhere between Rs. 15,000 o 30,000. SUVs/MUVs registered as taxis will be exempt.

The good news is that the Ford EcoSport, Premier Rio and the Renault Duster will be safe from these price rises by virtue of their dimensions or by being powered by a 1.5L diesel engine.

“Singling out SUVs destroys the level playing field. Sad, one has to find to fight harder to succeed in one’s own country,” Mahindra & Mahindra chairman Anand Mahindra said. He also questioned the logic of penalizing vehicles that carry more people per car than smaller hatchs. Nice point Mr. Mahindra, but let’s not forget the number of SUVs driven around by single individuals.

“As far as the automotive industry is concerned, the budget did not meet the expectations. We were expecting the roll back of the excise duty imposed last year. Some of the other announcements made by the finance minister for manufacturing, R&D activities, regulatory authority to monitor road projects, focus on skill development etc should enhance the competitiveness of the Indian industry.” said Lowell Paddock, President & Managing Director, General Motors India.

“We welcome the focus on infrastructure development, social benefits for inclusive and sustainable growth in the country. The investment allowance to boost the manufacturing sector is a positive move. The automobile industry is a significant contributor to India’s economy and future growth potential. We are disappointed that there is very little in the budget that will help boost consumer confidence and revive growth. It is a missed opportunity to introduce measures that would have revived industrial growth significantly. 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.” said Joginder Singh, President and Managing Director, Ford India.

“The auto industry was expecting reduction in excise across all vehicle segments to combat the current crisis. The 10-year Auto Mission Plan has also been talking of a favourable excise regime for the industry. Notably, cut in excise duty from 12 % to 8 % had helped the auto industry in somehow bearing the brunt of the 2009 downturn. Nothing of the kind has happened this time. Thankfully, the excise hike is limited to SUVs.” said Mr. Uttam Bose, MD, Hindustan Motors Ltd.

Jaguar XJ Ultimate Unveiled Beijing 04

“Increase in Custom Duty for imported cars and Excise Duty on SUVs is very surprising. It will severely impact the auto industry and its growth. We will have to seriously evaluate the impact of this hike on our prices and, have no choice other than to pass on the increase to the customer.” said Michael Perschke, Head, Audi India who also gave the budget a cheeky 3/10 rating!

The FM has decide to increase duty on imported cars to 100% from 75% and for imported motorcycles (of 800cc capacity) to 75% from 60%. Duty on second hand vehicles ( right hand drive, not older than 3 years) has been raised to 125% from 100%.

Subsidy for electric cars will stay around until 31st March 2015. This should be good news for Mahindra REVA.

“We are not happy with the move and this will have an impact on our operations as well as profitability,” Sandeep Singh, Deputy MD at Toyota Kirloskar Motor, said.

While all these announcements are geared to motivate companies to invest in India and locally manufacture/assemble the vehicles, the Indian automotive industry needs more reassurance from the Government especially with regard to the fuel pricing policy. Ford seems to have circumvented this issue by adopting a highly flexible production line that enables them to manufacture more number of diesel/petrol engines based on demand. Harley Davidson has also taken the plunge by adding the Softail variants to its already substantial line up of motorcycles assembled in India. We wonder what’s in store for the enthusiast in India.