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Old 31st January 2008, 00:13   #1
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Default Excise Duty Cuts for small cars: Advantage Customer Or Manufacturer?!

As I understand, the auto industry lobbied hard for an excise duty cut on ''small'' cars and the FM duly complied. The move was to make such cars ''affordable'' for the masses. Thats history. Lets look at what has happened since:

Manufacturers responded with price revisions as soon as the excise exemptions were announced. Others, had their cars revised to suit the norms.

Now, the cars that have been launched since - Getz CRDi, Fusion TDCi and the Skoda Fabia have been able to take advantage of this exemption. But have they rightfully passed it on to their customers..?

One look at their prices would suggest otherwise.

Does the Finance Ministry have any mechanism in place to prevent car makers from exploiting such norms? If not, I fail to understand the point of this whole exercise!

If it was partly aimed at reducing carbon emissions by encouraging small car purchases then I am afraid that is flawed as well. Just look at some of the ''bigger'' small cars running on puny petrol engines, in turn consuming more fuel.

To sum it up, the manufacturers seem to be making fatter margins and the customers are left to choose from a whole array of ''affordable'' premium small cars....need a definition? Ask the FM.
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Old 31st January 2008, 01:06   #2
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This is similar to the lobbying by builders to usurp public land in places like Mumbai in their sincere efforts to bring stratospheric real state prices down. Do the builders believe it, no, do the government officials and politicians believe it, no, do the media lobbied by builders pr agencies believe it, no. Do the public and you believe it? That's the question.

But seriously this is how things work in the absence of a strong regulatory framework. Laws are effective if they are implemented. Similarly if the FM gave these concession on the understanding and condition that it would reflect in the end user prices it would follow that he and his minions at the FM have the paperwork ready to enforce it. So its his job now to make sure it does, or was our paperwork obsessed Finance ministry taken in by these fine gentlemen from the auto industry to take their word for it. A gentleman's agreement. Oh yes. Let's not be naive.

Last edited by raul : 31st January 2008 at 01:16.
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Old 31st January 2008, 09:30   #3
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maybe its time the govt put even price of the car as a factor

this small car concept is rubbish...how can you always go with an idea that samll means cheap?!

govt should have cut on the excise on any car that costs less than 5.5 lacs,only then manufactureres would have been forced to price cars like fabia,fusion in this price range

now only the companys are making profits nobody else


govt should understand that car market is not as simple as they think
here its not about size and engine capacity alone but also the brand,marketing etc etc

we need somebody with sound knowledge of automotives to do this job of law making

just being a good economist may not help indians when it comes to cars
our FM looks at cars like mere transportation maachines
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Old 31st January 2008, 10:09   #4
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i feel the FM or the ministry as such is helpless in this issue.dont just compare the prices by looking at the length of the car.its what you get for the price you pay and that includes the brand image too.can you imagine any merc to sell at 4 lakhs just because its less than 4000 cm in length.but what i feel is that the money an end user -customer saved during the excise cuts were about 15000 rs.that money would easily have gone into improved engine specs or quality etc.so just dont blame manufacturers.this is a competetive market and all guys out there are battling for the small piece of cake day in and day out.so they have to price their products attractively else it will detter there volumes and hence profit.
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Old 31st January 2008, 10:38   #5
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Well, neither of the three examples you have mentioned are selling in high numbers, so I guess the market has given its verdict already. I'd be interested in knowing just which manufacturers have passed on excise benefits to their customers.

In the Tata Indigo CS thread, it is pretty evident that the reduced excise reflects in its price tag. And it is expected to be a roaring success!
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Old 31st January 2008, 14:05   #6
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Nobody is arguing with car maker's rights to price their products as they please, after all this is a free market, the FM has no business interfering with the pricing of cars or making them affordable. Material costs, R&D, manufacturing, marketing costs etc are always rising and accordingly reflect in the price of the end product.

However asking for and getting concessions on excise on the sole basis of passing on those costs to the end user and then forgetting about it is clearly wrong. But like I said earlier this is the FM's responsibility to ensure follow through if indeed the cuts were made for that reason.
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Old 31st January 2008, 14:14   #7
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My two cents:

The decision to reduce excise duty was a much needed one.
But shouldn't the cut be applicable like it had been in japan.

The norms were on the engine size.
A smaller car with a small engine was having lesser taxes.
Kei car - Wikipedia, the free encyclopedia

Same could have been done in India.
Or as it has been already suggested why not keep the excise cut price based????
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Old 31st January 2008, 16:59   #8
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why have it price based??
If the govt's idea was to promote cars that have lesser green houe impact..then let them promote exactly that....
lesser the carbon foot print..more the discount!

And guess...which car will come on top....

anyway, i feel that by having the excise discount based on the car price is not a great idea, as manufacturer's will start compromising on quality...not visible quality but certain things like safety features(or quality of those safety features), build quality etc..... Remember not all car buyers are smart enough to log on to tbhp to find out tech details abt all available cars....most of them just go and buy the cheapest(one that fits there budget).

...my 4 cents..

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Old 31st January 2008, 17:06   #9
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This Budget the FM may not roll out any new excise cuts on the cars. He has already done so and have seen whats happening. The manufacturers are clobbering up the additional moolah into their coffers w/o passing on to the customers. Instead, the car manufacturers are rising the prices courtesy input cost have gone up. I fail to understand how this is possible.
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Old 31st January 2008, 21:22   #10
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Quote:
Originally Posted by snaronikar View Post
This Budget the FM may not roll out any new excise cuts on the cars. He has already done so and have seen whats happening. The manufacturers are clobbering up the additional moolah into their coffers w/o passing on to the customers. Instead, the car manufacturers are rising the prices courtesy input cost have gone up. I fail to understand how this is possible.
Do you have any data on this? I want to know which car maker makes how much by giving no cut on prices to the customers, and get the tax benefits from the Govt?
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Old 31st January 2008, 21:26   #11
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I beleive the Govt should also consider the show room price of a car along with the engine capacity, seating, length and whatever other bits involve while fixing the taxes - "If the Govt if for the People, and not for the manufacturer". :-)
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Old 1st February 2008, 00:21   #12
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Debate able topic.
Either Competition or a big brother watching can keep the exploitation in check.
Keeping in mind that there is a one lakh car out...the cut should translate into a cut in price to the masses.
Like for example the Indigo CS came out at a lesser price to compete with the reno, would it have been as competitive had the reno not been there?
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Old 1st February 2008, 01:02   #13
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Quote:
Originally Posted by GTO View Post
I'd be interested in knowing just which manufacturers have passed on excise benefits to their customers.
Fiat India did reduce the price of Palio as a result of excise reduction:

Ex.Showroom price of Palio base models in Delhi:

Before reduction: Palio 1.2 ELPS: Rs.3,80,838/-
After reduction : Palio Stile 1.1 SL: Rs.3,51,977/-

Last edited by finneyp : 1st February 2008 at 01:03.
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Old 1st February 2008, 12:09   #14
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Quote:
Originally Posted by agbenny View Post
Do you have any data on this? I want to know which car maker makes how much by giving no cut on prices to the customers, and get the tax benefits from the Govt?
I was working for a car manufacturer previously. Hence I know the margins they make and how much they pass on to customer. But it cannot be disclosed as I'am bound by ethics.
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Old 3rd February 2008, 00:15   #15
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Quote:
Originally Posted by finneyp View Post
Fiat India did reduce the price of Palio as a result of excise reduction:

Ex.Showroom price of Palio base models in Delhi:

Before reduction: Palio 1.2 ELPS: Rs.3,80,838/-
After reduction : Palio Stile 1.1 SL: Rs.3,51,977/-
and I believe in the interim, input costs like steel et al have increased as well - every other day you hear of auto mfrs about to increase prices by 2-3% blah blah. or maybe they realized people won't pay those prices

Indigo CS is the shining example like GTO mentioned. let's just vote with our feet (like the fusion D) - its Disappeared I see more fusion P in delhi
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