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Big cars to cost more

Big cars to cost more; addition to excise duty

Apnaloan.com Research Bureau

14 Jun 2008

Big cars are set to get a lot more costly. The government has imposed an excise duty ranging between Rs. 15,000 to Rs. 20,000 on every such car, in addition to the existing 24 per cent excise duty. The new duty structure will come into effect immediately.

The duty will be for cars with an engine cubic capacity (cc) of 2000cc and above, while cars with an engine capacity of 1500cc to 1999cc would attract a lower additional specific duty of Rs. 15,000. Normally, mid-size sedans have an engine capacity of 1500-1999cc, while SUVs and luxury cars have an engine capacity of 2000cc and above.

While sales of luxury car brands like Audi, DaimlerChrysler and Skoda are likely to be hit to a certain extent by the current move, Honda Siel Car India may take the biggest hit as it is the market leader in the premium car segment.

As a result of the additional duty, prices of Maruti SX4, Hyundai Verna, Honda Accord, Honda Civic and Renault-Logan are bound to go up by Rs 15,000 per unit. The price of Tata Safari, Tata Sumo, Mahindra Scorpio and Bolero, Toyota Innova, and luxury cars, including BMW, Mercedes and Skoda will go up by Rs.20,000 per unit. However, the new duty structure will not hit the price of small cars like Maruti 800, Alto, WagonR, Hyundai Santro, i10 and Tata Indica.

It will further increase the price gap between small and big cars and put the tide in favour of small cars. The demand for big cars may slide due to the recent hike in fuel prices as customers are looking for more fuel-efficient smaller cars.

As reported by Economic Times, Hyundai Motor India, Senior Vice President Arvind Saxena said, "It is absolutely unexpected at this time. While we are fighting the huge increase in input costs and fuel prices, the additional duty has come as a big blow at the wrong time. It will push up prices for customers who are already reeling under high inflation and rising interest rates."