Budget 2010 surges automobile prices

The Indian Finance Minister, announced the finance budget on February 28, 2010, where in the budget called for an increase in the excise duty from 2% to 5% threatening to increase the vehicle prices from Rs. 5,000 to Rs. 1,00,000 or more depending on the price of the vehicle.

Maruti said the hike in its prices will be around Rs. 25,000, Hyundai will slate its prices in the bracket ranging from Rs. 6,500 to Rs. 25,000, Tata Motors will raise the price of its heavy vehicles by Rs. 60,000 to Rs70,000 and by Rs. 6,000 – Rs. 7,000 for its smaller vehicles while models from General Motors will experience a raise in the bracket of Rs 6,200 to Rs 22,000.

Though in general the automakers termed the Budget as a “positive and growth-oriented one,” majority of them said they were not expecting an increase in the duty on petroleum products and excise duty.

The Auto Budget 2010 also includes:

• Reduction of import duty and excise duty on hybrid cars, and incentives for development of technology for hybrids

• Excise duty on diesel driven trucks / lorries to be bought at par with excise duty on petrol driven trucks/ lorries, which had been reduced to 8 percent from 12 percent in the 2009 interim budget

• Making interest payments paid on auto and two wheeler loans eligible for income tax deduction (under Section 80C of I-T Act) to increase consumer demand.

Pawan Goenka, president of Society of Indian Automobile Manufacturers (SIAM), said the automakers did not anticipate the rollback of 2%excise duty, which will adversely affect the auto industry. The continuation of the stimulus packages, according to Pawan Goenka, would have helped the automobile industry in India regain its momentum of growth.

Overall, although no radical measures have been proposed, keeping in mind the 16 year high fiscal deficit of 6.8 percent of the GDP to be addressed by the Finance Minister, even a partial retention of current excise duty structure and granting other carrot would assist the sector in retaining its growth from a short term perspective.D