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Old 17th January 2010, 22:35   #1
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Default Withdrawing of economic relief and its impact

With budget round the corner, and talks of economic revival, the moot question is will the government withdraw economic relief viz. decreased excise duty? I' am sure that the car prices will go up the moment excise duty is increased, and it is natural since all car manufacturers had passed on the excise duty cuts to the customer. If this is the case does it become a case of hurrying up your decision of buying a car? Please advise.
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Old 17th January 2010, 22:46   #2
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Profit margin of car companies used to be around 10%.

At present this is around 20% (as per last quarterly reports on NSE).

So, rollback of 2 -3% of excise rebate should not be a game changer.
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Old 17th January 2010, 23:01   #3
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Thats irreversible at least in the present situation. Maybe the car makers get some other relief in the form of cuts in duties of imported components and so on in the forthcoming budget.
We must know that auto makers have formed a very powerful lobby (SIAM) and are able to tremendously influence the making and unmaking of the laws of the land mostly to favour them.
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Old 17th January 2010, 23:04   #4
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@netfreak, do you mean to say auto-makers will absorb the excise duty increase and will not pass it on? I mean we are talking of an amount in the range of Rs.15-20 thousand for a 5 lakh vehicle.
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Old 17th January 2010, 23:29   #5
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I think if any one increases the price then all will increase the price giving the reason that excise duty is increased.I think we can't except a much change in this budget.
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Old 18th January 2010, 11:50   #6
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I am guessing, just like the previous budget the government will not do much changes to the most of such items like cars.

Also note one point that all the government lobby recognises that the car is no longer a luxury item its slightly (though not fully) becoming a necessity for the middle class. Thus dont think it will be affected much.
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Old 18th January 2010, 11:57   #7
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Fiat has already increased the prices. Maruti has followed suit, though not very high, the increase ranges form 1k-10k. Out in today's TOI. Expect other companies to announce hikes in the following days.
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