Buyers’ Alert: Cars to get cheaper in India! Here’s why

With the budget around the corner, the automobile industry, which has been struggling to clock in decent sales, is waiting with bated breath for the government to announce a slew of excise duty cuts that will give them enough head-room to push their sales higher in the new fiscal year. Consumer sentiment, which has been cautious in the past few years, given high inflatory pressure on their purse strings, was further hit when the government decided to remove the cut in the excise duty that was introduced in February 2014.

“With the onset of the Union Budget 2015-2016, the Society of Indian Automobile Manufacturers (SIAM) is hoping that the Finance Minister will roll-back the excise duty so as to buoy auto-sector demand. The excise duty cut which was initially implemented on February 2014 across all vehicle classes was prolonged till December 2014 by the FM in the interim budget last year and was finally rolled back as of January 2015,” said Vinay Khattar, associate director and head of Research, Edelweiss.

According to market estimates, on an average, the roll-back of the excise duty cut has resulted in nearly 5% hike in the prices of the vehicles across segments. “This could have an adverse affect on demand,” added Khattar.

A slash in the excise duty is expected to bring down the prices of the cars by anywhere between 4%-6%.

For instance, the price of a Hyundai Elite i20 model, which is presently available in the market for over Rs 5.20 lakh, can come down by nearly Rs20,000, considering that the excise duty cut was 4% on small cars. Similarly, the price of Chevrolet Cruze, which is priced at Rs 14 lakh, can be expected to come down by a whopping Rs 50,000.

In the luxury segment, major brands such as Mercedes, BMW and Audi too could re-jig their prices, if the government decides to re-introduce the excise duty cut in Budget 2015.

However, despite desperate cries for help from the auto sector, it will be a tough call for the government to take on budget day. It is estimated that the introduction of the cut in excise duty has resulted in a loss of Rs 700 crore to the exchequer.

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