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Old 27th February 2013, 22:00   #1
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Post Budget 2013 & The Car Industry

Note : This article was actually taken live post-budget, on the 28th of February, 2013.

It has been jointly compiled by GTO & Redline6800


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It’s a poor budget for the auto industry and can be best described as one that doesn’t acknowledge the sector’s problems at all. The market has been reeling under the effects of a decrease in demand, rising fuel prices and poor sentiment; the Finance Minister (FM) announced absolutely nothing that could rejuvenate demand.

Unfortunate that our auto industry receives such treatment from the Center. The sector greatly contributes to the Indian economy by way of taxes, investment & employment creation. In the recent past, car companies have announced putting off their expansion & investment plans. The situation is unlikely to change in the near future.

Main Talking Points of the Budget 2013:

1. The FM has proposed that the excise duty on SUVs be hiked from 27 to 30%. There is no official definition of an SUV to separate it from MUVs. Toyota India has confirmed that the excise duty hike applies to all UVs (i.e. SUVs & MUVs, both). Ironically, the UV segment is the only one that has been experiencing a growth phase in India. Cars like the Toyota Innova, Mahindra Scorpio & Tata Safari are sure to suffer from price hikes of about Rs. 25,000 – 30,000. Interestingly, UVs registered as taxis will be exempted from the excise hike.

On a positive note, compact SUVs (<4 meters in length and with <1.2L petrol or <1.5L diesel engines) remain at the excise duty slab of 12% only. The Ford EcoSport & Mahindra Quanto just heaved a sigh of relief! The Renault Duster also appears to be in the safe zone. Although it runs over 4 meters in length, the 1.5L diesel engine has always made it attract an excise duty of 24%.

2. High-end customers for imported luxury cars will feel the pinch of the FM’s decision to increase the duty on CBUs to 100% (up from 75%). Effective levies thus go up to about 160% for CBUs. Team-BHP welcomes this move as higher import duties will force more manufacturers to invest in local assembly to remain price competitive.

3. The duty on high capacity motorcycles (800cc or more) has been increased to 75% (from the existing 60%).

4. Subsidy benefits for electric cars remain in place till 31st March 2015, something that will help the cause of the soon-to-be-launched Mahindra Reva e2o.

5. The duty on second hand vehicles has been raised to 125% (from 100%). The Indian government only allows the import of right-hand-drive used cars that are up to 3 years old.

6. All those who like nothing better than to hit the road will welcome the budget proposal to set up an independent regulatory authority to address bottlenecks and speed up 3,000 kms of stalled road projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh.

7. Motor Insurance found a mention in the budget. Public sector general insurance companies will now organise "adalats" to settle claims. More than 10 lakh third party motor claims are pending before Tribunals / Courts in India. What is regrettable however, was the lack of a single reference to the allocation of funds for improving road safety. India has the dubious distinction of the highest absolute number of recorded road deaths.

8. For many of us who travel by bus, the decision to continue the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in the 12th Plan is a welcome one. The allocation for JNNURM is proposed to go up to Rs 14,873 crore from the Rs 7,383 crore provided this year. A significant portion of the allocated budget will support the purchase of up to 10,000 buses. Tata Motors & Ashok Leyland stand to benefit from this allocation.

Industry Reactions:

Lowell Paddock, President & Managing Director, General Motors India:

Quote:
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. Instead there is an increase of 3 per cent excise duty on SUVs and there is also a hike in customs duty of 25% on high end imported vehicles. These hikes are not on the expected lines and will impact the sale of SUVs. Having said this, we have to see the fine print to understand the clear definition of SUVs.

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.
Joginder Singh, President and Managing Director, Ford India:

Quote:
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.
Mr. Michael Perschke, Head, Audi India gives the budget a rating of 3/10:

Quote:
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. Overall it will have an adverse impact on automobile industry which is already going through a slowdown and specifically affect demand including that of SUVs.

We are happy to note that there is a renewed focus on infrastructure especially roads. The proposed regulatory authority on road construction will hopefully fuel better infrastructure and speed up developments.

Last edited by GTO : 1st March 2013 at 09:07. Reason: Typo
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Old 28th February 2013, 12:39   #2
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Default Budget 2013 : SUVs & CBUs more expensive

P Chidambram has increased customs duty on fully imported cars from 75% to 100%

Also excise on Suv's to go up from 27 % to 30%
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Old 28th February 2013, 12:42   #3
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Default Re: Budget : CBU's to be more expensive

Add to that a 6 percent excise duty on cell phones above Rs. 2k.

Now "Driving" + "Talking" is now certainly bad for your wallet too !
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Old 28th February 2013, 12:42   #4
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Default Re: Budget : CBU's to be more expensive

Quote:
Originally Posted by ackyash View Post
P Chidambram has increased customs duty on fully imported cars from 75% to 100%

Also excise on Suv's to go up from 27 % to 30%
Is there an official definition of an SUV ?
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Old 28th February 2013, 12:46   #5
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Exclamation Budget 2013: Excise Duty on SUVs increased 27% to 30%

Here IMO is one more retrograde step by the FM:

The excise duty on SUVs has been increased from 25-30% on the pretext of them occupying "more parking and road space."
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Old 28th February 2013, 12:50   #6
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Default re: Budget 2013: Excise Duty on SUVs increased 27% to 30%

I think its increased from 27% and not 25%.
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Old 28th February 2013, 12:51   #7
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Default re: Budget 2013: Excise Duty on SUVs increased 27% to 30%

Quote:
Originally Posted by n.devdath View Post
Here IMO is one more retrograde step by the FM:

The excise duty on SUVs has been increased from 25-30% on the pretext of them occupying "more parking and road space."
What I see from multiple sources is "... taxes increased from 27% to 30%". So you might want to get that corrected after checking. I also see a clause that this is for "Indian made" SUVs! Looks quite anit-Indian manufacturers while SUVs either brought in as CKD / CBU evades the tax.

Edit:: Another clause was this duty is applicable ONLY for non-taxi SUVs. So should we expect the hike is for MPV / MUVs as well?

Last edited by swiftnfurious : 28th February 2013 at 12:58. Reason: Added "Edit" portion
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Old 28th February 2013, 12:56   #8
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Default Re: Budget : CBU's to be more expensive

Yup, the definition of an SUV is the catch here. Since he has mentioned up from 27%, I'm guessing its for SUV's that fall in this category - 'Cars with engine capacity > 1,500cc in case of diesel cars and 1,200cc in case of petrol cars and length more than 4 meters – 27%'

This would mean the Bolero, Safari, Scorpio, XUV, Duster, etc will all see a price hike. The Ecosport should be spared.

Last edited by fiat_tarun : 28th February 2013 at 12:58.
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Old 28th February 2013, 13:02   #9
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Default Re: Budget : CBU's to be more expensive

Quote:
Originally Posted by fiat_tarun View Post
Yup, the definition of an SUV is the catch here. Since he has mentioned up from 27%, I'm guessing its for SUV's that fall in this category - 'Cars with engine capacity > 1,500cc in case of diesel cars and 1,200cc in case of petrol cars and length more than 4 meters – 27%'

This would mean the Bolero, Safari, Scorpio, XUV, Duster, etc will all see a price hike. The Ecosport should be spared.
All the sedans also fall into this cateogry right? So how to make a differentiation - based on body shape? In such a case, will the Ertiga (petrol) be considered an SUV as it is above 4m, and has a 1.4L engine?

As I wrote on another thread, it's mentioned that "taxi-SUVs" will be spared. So will it also hit Innova / Xylo etc ? Or are those even included in the classification?

Quote:
Originally Posted by ackyash View Post
P Chidambram has increased customs duty on fully imported cars from 75% to 100%...
Wasn't it import duties some 130% or so?

Last edited by swiftnfurious : 28th February 2013 at 13:05.
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Old 28th February 2013, 13:03   #10
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Default re: Budget 2013: Excise Duty on SUVs increased 27% to 30%

Along the same lines, the custom duty for CBU SUV's is hiked from 75% to 100%.
SUV's have taken a real beating this budget. We should be looking at good sales numbers until the new tax regime kicks in April.

Last edited by speedmiester : 28th February 2013 at 13:05.
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Old 28th February 2013, 13:08   #11
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Default re: Budget 2013: Excise Duty on SUVs increased 27% to 30%

Quote:
Originally Posted by speedmiester View Post
Along the same lines, the custom duty for CBU SUV's is hiked from 75% to 100%.
SUV's have taken a real beating this budget. We should be looking at good sales numbers until the new tax regime kicks in April.
Changes in Customs & ED are with immediate effect ie midnight of 28th Feb. Manufacturers have quite a heavy margin on SUVs and may absorb the increase (atleast on ED)
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Old 28th February 2013, 13:20   #12
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Default re: Budget 2013: Excise Duty on SUVs increased 27% to 30%

Quote:
Originally Posted by speedmiester View Post
Along the same lines, the custom duty for CBU SUV's is hiked from 75% to 100%...
Guess that takes the effective import duties to a 160% ! Last year the total duties accounted for about 135% and there is a straight 25% increase this year.

Edit:: Are the CBU sedans & hatches spared from this tax?

Last edited by swiftnfurious : 28th February 2013 at 13:21. Reason: Added "Edit" portion
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Old 28th February 2013, 13:24   #13
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What is the definition of an SUV for this hike?
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Old 28th February 2013, 13:24   #14
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Default re: Budget 2013: Excise Duty on SUVs increased 27% to 30%

What is the definition of SUV as per Govt?
- Any engine capacity?
- Any driving mechanism (4*4/ 4*2)?
- Any seating capacity?
- Any fuel options?
- Any dimensions?
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Old 28th February 2013, 13:25   #15
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Default re: Budget 2013: Excise Duty on SUVs increased 27% to 30%

The logic given to increase excise on SUVs is completely bogus. We already pay higher road tax for larger (and hence mostly more expensive) cars in most states now.

Excise should have nothing to do with stress laid on road infra and environment by SUVs. FOr that road tax is the right vehicle.

However, having said that - its completely understandable motivation. Expenditures are planned to increase and the FM needs the revenue and who else will he tax but richer people. The extra excise from SUVs is just a vehicle.

~personally, I just bought a Yeti, so good timing I must say!!
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