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Small cars trail big ones despite excise duty sops

Small cars trail big ones despite excise duty sops

Author | Source: The Economic Times | Thursday, Jul 27,2006 7:17 AM

Small cars trail big ones despite excise duty sops

The excise sop for small cars this Budget was supposed to help compact car sales. But stats in the first four months after the excise announcement show that it has helped cars not covered by excise sops even more.

Industry estimates shows that sales of small cars which enjoyed excise benefits grew by around 22% during March-June. In comparison, cars that were not covered, which include bigger sedans as well as hatchback models with bigger engines, clocked a 29% increase in sales.

In the four months since the excise cut was announced, models covered by the sops - which include the Alto, M800, Omni, WagonR, Zen, Santro and Indica - clocked sales of 263,600 units, up 22% over the 216,950 units clocked a year ago. In comparison, the rest of the models in the marquee, which include some of the bigger hatchbacks like Getz and Swift, clocked 116,197 units, up 29% over the 90,150 units clocked last year.

According to auto industry watchers, the big difference in the non-benefit category was the performance of new models like the Chevy Aveo and the Ford Fiesta.

The two together clocked around 16,500 units or 14% of the total sales in that segment. Other newer models like the Skoda Superb clocked triple-digit growth, though in small numbers. In growth terms, models launched earlier last year like the Suzuki Swift and Hyundai Getz commanded a good clip, while others like the Honda City, Toyota Camry, Skoda Octavia, Maruti Esteem and Baleno and Mitsubishi Lancer all scored decently.

The industry is obviously looking at this phenomenon in different ways. Maruti MD Jagdish Khattar feels it shows that the small car sops have been a “win win for the government-while the old duty continues on the rest of the industry, overall growth has also picked up”. But more importantly, he says, “The government's vision of making India a small car hub is catching on in the global auto market thanks to the small car policy.”

Others like GM India CEO Rajeev Chaba feel that the differential introduced by the excise sop was eaten away by a variety of factors. “The excise cut has been neutralised by increase in input costs, fuel price hikes, hardening of interest rates, etc,” he says. So, the differential did not make an impact on growth.

Tags: e4m

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