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Old 30th December 2014, 16:35   #1
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Default Jan 2015: Reduced excise duty comes to an end. Car prices to climb

Cars, SUVs and two-wheelers will become expensive from January 1 with the government deciding not to extend the reduced excise duty rates provided to the sector.


Link:
http://www.thehindu.com/business/Ind...?homepage=true
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Old 30th December 2014, 17:56   #2
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Default re: Jan 2015: Reduced excise duty comes to an end. Car prices to climb

Will the withdrawal of this benefit affect prices of Hatchbacks also? I am asking this since the benefit was not given to the segment in the 1st place.
However I am afraid that the auto manufacturers might find this as a very good reason and increase prices on hatchbacks also. I am making this statement especially considering that none other than RC Bharghav (Maruti Suzuki) has made a statement that this move on the Govt. part is not a good one. I am wondering why has a man of his stature made such a comment considering that only 2 cars from their stable would be affected - Ertiga and Ciaz.

Please correct me if I am wrong since I have made the above statement purely based on the reports I have read on the various News sites.
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Old 30th December 2014, 18:06   #3
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Default re: Jan 2015: Reduced excise duty comes to an end. Car prices to climb

As far as I know, excise duty is paid on goods as they leave the factory gates. This means that any car manufactured & dispatched in 2014 will have the excise duty paid at reduced rate.

For anyone buying a 2014 manufactured car in 2015 - they will pay the increased price of the car (invoicing in 2015 based on revised price list) but the manufacturer would have paid less excise duty. Some extra profit for manufacturers/dealers here? Shouldn't invoicing be based on the 2014 prices?
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Old 30th December 2014, 18:12   #4
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Default re: Jan 2015: Reduced excise duty comes to an end. Car prices to climb

Several manufacturers had not passed on the full benefit of the excise cut to the end customers - they kept part of it to boost their profits. However, now auto companies will pass on the full increase to the end user.

The end result is that cars will be more expensive than what they were before the cut. Some vehicles like the Storme LX will cross the 10L mark in ex-showroom prices in KA and will command a far higher road tax.

Overall the government is running short of money. They reduced income tax slabs earlier this year and probably realized now that jump starting the economy isn't that easy and "achhe din" will take a looooong time to come . So increasing the excise duties is an easy way to cover their revenue shortfall.

Last edited by sdp1975 : 30th December 2014 at 18:18.
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Old 30th December 2014, 18:16   #5
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Default re: Jan 2015: Reduced excise duty comes to an end. Car prices to climb

Quote:
Originally Posted by Maverick1977 View Post
Will the withdrawal of this benefit affect prices of Hatchbacks also? I am asking this since the benefit was not given to the segment in the 1st place.
However I am afraid that the auto manufacturers might find this as a very good reason and increase prices on hatchbacks also. I am making this statement especially considering that none other than RC Bharghav (Maruti Suzuki) has made a statement that this move on the Govt. part is not a good one. I am wondering why has a man of his stature made such a comment considering that only 2 cars from their stable would be affected - Ertiga and Ciaz.

Please correct me if I am wrong since I have made the above statement purely based on the reports I have read on the various News sites.
It is not true that benefit was not passed on to hatchback. The excise duty on small cars / motorcycle/ scooters was 12% which was reduced to 8% so if this news of roll back is true then excise duty on hatch back will increase to 12% again.


Read following article which confirms this:
http://www.financialexpress.com/arti...ndustry/24400/
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Old 30th December 2014, 18:23   #6
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Default re: Jan 2015: Reduced excise duty comes to an end. Car prices to climb

In addition Car manufacturers have also announced price hike citing rising input costs reason, this is again going to increase the prices further.
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Old 30th December 2014, 18:28   #7
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Default re: Jan 2015: Reduced excise duty comes to an end. Car prices to climb

Quote:
Originally Posted by Maverick1977 View Post
I am wondering why has a man of his stature made such a comment considering that only 2 cars from their stable would be affected - Ertiga and Ciaz.
Maruti is set to launch three models in 2015 which would be affected by the move.
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Old 31st December 2014, 00:07   #8
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Default re: Jan 2015: Reduced excise duty comes to an end. Car prices to climb

Withdrawal of excise duty sops and a falling rupee will cause the overall prices to increase from 4% (min) to 8-9% (max). Most manufacturers had already announced price hikes for 2015 giving the excuse of rising input costs, but the few who had refrained will be forced to roll out price changes across the board and also factor in the depreciating rupee.
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Old 31st December 2014, 08:00   #9
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Default re: Jan 2015: Reduced excise duty comes to an end. Car prices to climb

Those who are yet to announce price hikes were just waiting to get this confirmation so that they can have a single hike, instead of two back to back hikes that others would need to do now.

I guess the used car market would also get a boost in terms of demand or a higher resale value with a considerable hike in new car prices.

On a different note, the sub-4m concession still holds and I actually hope the government does something in the next budget to take away the concessions for those exploiting the rule while retaining it to the actual small cars. Cars like Dzire, Ecosport, Swift, i20, Punto etc are not really small cars and should not be given any heavy concession that a 4.2m car doesn't get. Indirectly, it would help getting rid of a lot of ugly vehicles from the market as well.

If Japanese can run on 660cc kei-cars, we should have 1L petrol and 1.2L diesel as the maximum engine capacity for small cars - MJD and K9K are not really small car material and both should be excluded from the smallest segment. On the length front, an actual small car doesn't need to exceed 3600mm in length. Same with the width - not more than 1600mm.

Last edited by zenren : 31st December 2014 at 08:02.
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Old 31st December 2014, 08:53   #10
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Default re: Jan 2015: Reduced excise duty comes to an end. Car prices to climb

Free market anyone? Whether the manufacturer pass on the excise duty benefit to the customer or not is immaterial. Anyway, prices of cars are not a direct reflection of the input cost, but how much price it would fetch from customers. So as long as manufacturers do that math correct, this excise duty pass-on/absorption should be none of our headache.
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Old 31st December 2014, 09:27   #11
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Quick question, is this hike applicable for cars sold on and after Jan 1,2015 or for cars manufactured and delivered to dealer after Jan 1, 2015. Basically is it applicable for old stocks as well, if delivered from tomorrow. Or just like most laws of our country open to interpretation of the person executing it, and thereby room of negotiations.
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Old 31st December 2014, 09:32   #12
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Default re: Jan 2015: Reduced excise duty comes to an end. Car prices to climb

Yes, the hatches will get expensive, of which there is no doubt. I am only hoping that we will finally get some good 1.6/2l engined hot hatches. Even now, no one stops that, but, the mindset was to go to 1.2/1.5 puny engined hatches, which might probably be a little different going forward. Also, some hatches were redesigned specifically for India to get into the 4m mark, whereas their counterparts elsewhere were slightly more than 4m (Ford Fusion and Fiat Punto are examples that come to my mind). In fact, European Punto looked more proportional than Indian Punto. Hopefully, the manufacturers will not be doing all this circus going forward.
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Old 31st December 2014, 09:58   #13
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Default re: Jan 2015: Reduced excise duty comes to an end. Car prices to climb

Quote:
Originally Posted by jha.shailesh View Post
Quick question, is this hike applicable for cars sold on and after Jan 1,2015 or for cars manufactured and delivered to dealer after Jan 1, 2015. Basically is it applicable for old stocks as well, if delivered from tomorrow. Or just like most laws of our country open to interpretation of the person executing it, and thereby room of negotiations.
The hike will not affect us until/unless the manufactures announce a price hike. Until then, we can enjoy the old prices while the manufacturers absorb the tax.
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Old 31st December 2014, 10:17   #14
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There goes my "brilliant plan" of waiting till Jan 2015 to get a 2015 manufactured car on the hope of eeking out a few thousands in resale value! Looks like I have to shell out 30k more now and don't think will make up such a big amount in resale value either!
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Old 31st December 2014, 10:17   #15
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Default re: Jan 2015: Reduced excise duty comes to an end. Car prices to climb

Quote:
Originally Posted by zenren View Post
On a different note, the sub-4m concession still holds and I actually hope the government does something in the next budget to take away the concessions for those exploiting the rule while retaining it to the actual small cars. Cars like Dzire, Ecosport, Swift, i20, Punto etc are not really small cars and should not be given any heavy concession that a 4.2m car doesn't get. Indirectly, it would help getting rid of a lot of ugly vehicles from the market as well.
I don't see this happening. We already have four excise duty slabs, the last thing we want Government to do is further bifurcate these slabs and complicate it.

Also, this will give unfair advantage to only two manufacturers viz. Maruti and Hyundai as some of their high volume models fall in the 3600m range. 40% of Maruti's monthly sales comes from Wagon R, Celerio and Alto, all of which are less than 3600mm.

I would not say that manufacturers are exploiting rules, they are in fact making huge investments to offer cars less than 4m. Honda Amaze, Tata Zest, Hyundai Xcent, Ford Figo sedan are good examples of beautiful looking compact sedans which are designed and offered without appearing to be a compromise. Maruti Dzire is an aberration in this.

Rather than focusing on length, I would want government to give higher exemptions for fuel efficient and safe cars.
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