Small cars in overdrive, foreign wheels hit curb

Small cars in overdrive, foreign wheels hit curb

Author | Source: The Economic Times | Wednesday, Mar 01,2006 8:12 AM

Small cars in overdrive, foreign wheels hit curb

It's party time for the volume vroomers in the car industry. Thanks to an 8% cut in excise duties on small cars, most models in the B-seg bunch will get cheaper by Rs 12,000-25,000. The reduction roster includes the Hyundai Santro, the Maruti M800, Omni, Alto, Zen and WagonR and the Tata Indica.

However, the hot hatch debutantes Swift, Getz and Aveo U-VA have been left out of the excise windfall thanks to bigger engines. Auto industry sources say this may result in car companies introducing lower displacement variants of super mini models. Hyundai, for instance, is reportedly considering both a diesel and a 1.1 litre petrol variant of the Getz. And Maruti will roll out its 1.3 litre diesel Swift later this year.

At the other end of the price spectrum, imported models like the Honda CR-V, Toyota Camry or Hyundai Terracan and Tucson will get dearer by anything between Rs 30,000 to 1 lakh on account of the 4% CVD slapped on all imports. Luxury marques like the Bentley and Porsche will see increases ranging from Rs 1 lakh-4 lakh.

The excise boon for small cars (not exceeding 4,000 mm in length and engine size not more than 1200 cc for petrol and 1500 cc for diesel) has left the industry sharply divided. While volume carmakers say it will improve growth by swelling the biggest sales segment in the market, others say it's unfair. Says Arvind Mathew, MD, Ford India: “A level playing field is essential to encourage global manufacturers to participate more actively in India. An excise duty reduction across the board would have been aligned with India's globalisation actions.”

Dittoed Rajeev Chaba, MD, GM India: “We can't understand why there are two conditions-engine and length-for the differential excise duty. There are new technologies available which make higher displacement engines more fuel efficient so why have the engine cut-off?”

Indeed the 4% CVD will make spares and CBU imports more costly for high-end car makes says Suhas Kadlaskar of DaimlerChrysler India. So will it dampen demand of imported cars at the top-end? Unlikely say dealers given the price slabs these luxury badges sport. As for small cars, that segment could see some new players and models.

Says Jagdish Khattar, MD, Maruti Udyog: “This should encourage more players to enter the small car segment which should clock double-digit growth. It will also help in exports.”

Tags: e4m

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