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Feb 28, 2013, 12.55 PM IST | Source: Moneycontrol.com

Hike in excise on SUVs to hurt Tata Motors, M&M

Finance Minister raised excise duty on utility vehicles to 30% from 27%, which will hit companies like Tata Motors, Mahindra & Mahindra.

Moneycontrol Bureau

Finance Minister raised excise duty on utility vehicles to 30% from 27%, which will hit companies like Tata Motors, Mahindra & Mahindra.

All SUVs except those used for taxies will have to pay the higher duty. SUVs saw strong sales growth over the last one year even as the overall passenger vehicle market slowed.

Companies will almost certainly pass on the hike on excise duty on customers. So, it needs to be seen if the segment contineus to see strong demand.

Here's what the auto industry had expected from the Budget:

No tax on diesel vehicles The auto companies had opposed any additional tax on diesel vehicles due to the already sluggish demand environment. The government recently partially de-regulated diesel prices and so an additional tax was not expected.

Incentives for electric vehicles in the form of subsidies. The earlier subsidy regime ended on March 31, 2012 and since then sales have slumped.

Fleet Modernisation The industry had therefore sought incentives/policies from government to replace old and polluting vehicles (15 years for CVs and 10 years for cars). This would have boosted sales, especially of passenger cars and medium, heavy commercial vehicles, which are the worst hit due to the overall industry slowdown.

Schemes similar to JNNURM The Jawaharlal Nehru National Urban Renewal Mission boosted bus sales as many city/town municipal bodies augmented their local public transport services. Budget 2009 had supported purchase of 14,500 buses under JNNURM. The industry wanted a revival of that or a similar scheme, especially given the sluggish demand environment at present.

Incentives for Auto component makers The auto component makers in the country have been hit hard as a slowdown in vehicle sales means, demand for auto parts from auto makers has been low. Therefore they wanted more incentives to make exports more competitive.

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