The excise cut may have bought relief to subcontinent populous but it failed to creep into every customer. On February 17th, Finance Minister Mr. Chidambaram announced cut in excise duty in-order to woo the voters for the upcoming general elections; but he gave an explanation that the excise cut was to boost up the disaster stricken auto-industry. Sales have been on the lowest level in the decade and there are no signs of the industry to cope up. Excise cut ranged from 3-6% across various models.
Many auto companies hugged the excise cut and they did pass on the happiness to their customers while a few shared a part of the price slash. Since the announcement, companies have been declaring the reduced price one after the other but there are a few who have decided not to join this league. The Indian top sellers namely Maruti Suzuki, Hyundai and Tata Motors have decreased the prices for many variants while General Motors, Honda, Volkswagen and Skoda dejected and limited their customer’s happiness to limited models.
Though Ecosport’s prices were slashed by a mere 2.7%, Ford was happy as this mini-SUV is selling like hotcakes and volume is the magic wand for the company. Mahindra took the advantage of the duty cut and fully subsidized the Xylo and Verito variants; a move to clear their inventory. Apart from that, the Scorpio’s cost dwindled by 1.9%. Skoda increased the prices of almost all of its models in this calendar year. For Renault only Scala has been a part of the price cut; while the super hit Duster and not so popular Pulse have stepped up the price rung.
Manufacturers keep harping that the industry needs relief and the government should cut excise duty but when the centre does listen and reduce duties, the manufacturers choose to enjoy the additional profits rather than passing it onto customers in full. This somehow beats the purpose of the excise duty cut.
Anyhow it is not compulsory for companies to pass on the benefits to the end customers. It depends on companies either to subsidize the cost or increase its profit margins in these few months. The sluggish sales have chopped down the overall profit and this is the last chance for this fiscal year for the companies to cash in some green charts. A very competitive home market has brought down profit after tax (PAT) from 15% to 8%; that is the reason we frequently notice price hikes based on rise in price of raw materials.
The excise duty cut would be in effect till June 31st 2014. If you are planning to buy a car in the near future it’s better to pre-pone your plan and grab up one before July. Though the price cut maybe minimal for selective models but still savings are savings.