The 2013-14 union budget had lot of implications on the auto sector. 3% Excise duty on SUV’s are increased, justifying that SUV’s are big, occupy lot of space and difficult to park. Well definitely SUV’s are big and take more space but by taking into context that one SUV sold in India there are probably 20 hatchback sold and those 20 hatchbacks fight for the same amount of space. This price hike will definitely going to impact the SUV manufacturer.
If we go to see Mahindra, large part of their portfolio is SUV,s. here is no denying that a lot of their customer are going be affected by the price hike. On other hand compact SUV’s with less than 4 meters in length and with less than 1. 2L or 1. 5L of diesel engines remain at the same excise duty slab of 12%. The new for Ecospot and Mahindra Quanto will have a sigh of relief. CBU cars are going to get affected as the custom duty is increased up to 75% to 100%. (import value higher than $40,000, engine capacity more than 3. 0-litre (petrol)/2. 5-litre diesel) Whereas customs duty on CBU motorcycle above 800 cc will be increased from 60 percent to 75 percent.
The proposed budget will have a big impact on the growing automobile industry of India. One can expect luxury cars and superbikes to become costlier due to the increase in CBU duties. The luxury manufacturers will have to bring their products through Completely Knocked Down (CKD) route, in order to keep the competition heated up. Just recently Harley-Davidson announced local assembly of its Softail range of motorcycles, which comes at the right time for the American motorcycle company.
Parts for electric and Hybrid powered vehicles will undergo tax breaks until 2015 which is quite evident in terms of the Government favoring Green technology and also adds to the focus on higher fuel efficient cars for the domestic market. All in all this year budget has been negative for auto sector because of the price hike in SUV and CBU. The manufacturer will pass on the hike to the end consumer which will impact the sales of the auto sector.