Indian union Budget and its effects in Car market

On 28th February 2013 Finance minister P Chidambaram conducted the Indian Union budget for 2013. We taught that the car market will get some reductions in tax but just the opposite happened. Indian car market was hit in some unexpected areas by government.



The car sales of this year is the lowest in the decade. Indian car markets growth rate showed its worst decline in this year. High interest rates for car loans and fuel price hike has badly damaged Indian car market. The government instead of helping it rise up punished it with more taxes.


Lets see what are the changes government introduced in car market

Excise duty hike for SUVs

Indian government has hiked the excise duties for Suvs . Suvs showed growth rate of 57% this year, they were the only scope for car manufacturers to come up from the decline in car sales. But tax hike of Suvs were totally unexpected by the car makers.

 Government will increase the taxes of Suvs from 27% to 30%. This means Suvs like Renault Duster and XUV 5OO is going to be more pricy.  Sub 4 m Suvs like Ford Ecosport and Mahindra Quanto will not be affected by this. Mr Chidambaram said that SUVs are hug, they drink a lot of fuel and gobble up parking space, so their taxes should be increased.

Taxy vehicles will be excluded from this additional duties

Excise duty hike for diesel Cars.

Diesel cars are going to be very pricy from now on. Government will hike the excise duty of diesel cars from this financial year onwards. We have seen the government hiking the diesel prices recently and has also given permit for Oil companies to hike the price in fixed intervals.

Government is currently offering subsidies for diesel. For this government has to spend huge amount of money. So government hopes to regain the money spent through diesel subsidies by increasing the tax of diesel vehicles. So demand of diesel cars will decrease and petrol cars will come back once again to the main screen.

Increase in import tax for importing through CBU route

Government has hiked the import taxes of automobiles from 75% to 100%. This is gonna be trouble for cars imported via CBU route. Most of the luxury cars from BMW, Jaguar, Volvo, Audi and Mercedes are imported through this route.

 

 

Reduced customs duties for electric cars have been extended to 2015

The only relief for car market is this. The reduction od customs duties and other taxes for imported electric  and hybrid vehicles will be continued until 2015. This is going to help Mahindra Reva and Renault Fluence hybrid.

 

The Aftermath

Plenty of changes will happen on Indian auto industry based on the Indian union budget. Here are some of our predictions

• Price hike for large Suvs like XUV5OO, Duster and Tata Safari.
• Arrival of more compact Suvs
• Price hike for diesel powered cars.
• Decrease in Demand for diesel cars.
• More sub 4 m sedans
• Heavy localization of cars in India
• Price hike for luxury cars from BMW, Jaguar etc.
• Decline in car sales.
• Increasing demand for electric vehicles

So if you have any suggestions or ideas report to us.