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May 03, 2013, 04.23 PM IST | Source: PTI

SUV tax will compel modifying products to meet norm: M&M

Faced with higher excise duty on its SUV models, homegrown auto major Mahindra and Mahindra today said it will be compelled to consider modifying its products to align with the new specifications for lower duty.

Faced with higher excise duty on its SUV models, homegrown auto major Mahindra and Mahindra today said it will be compelled to consider modifying its products to align with the new specifications for lower duty.

Mahindra had previously expressed concerns that in the current economic environment, any additional duties levied by the government will be counterproductive from a revenue generation viewpoint, the company said in a statement.

"While the tax in itself is a concern, we are perplexed about the criterion and justification of this additional duty," Mahindra & Mahindra President (Automotive & Farm Equipment Sectors) Pawan Goenka said.

Also read: Mah and Mah's sells 41432 units in April 2013

If the increase in excise duty is to compensate for the diesel subsidies, why haven't all diesel vehicles been included under the proposed increase? he asked. "If it is for road congestion, why haven't all large vehicles been subjected to the same tax hike? If this is a tax on the rich, why not tax all vehicles above a certain price point?," Goenka further said.

On the implications of the higher tax on SUVs, he said the increased excise duty will compel Mahindra to consider modifying their products to align with the new specifications for lower excise duty.

"We are not sure how to define a product now. We need continuity in policy as we cannot keep changing, although we will do whatever possible to try to get back to 27 per cent excise bracket," Goenka had stated yesterday.

Under the current definition given by the Finance Ministry for the taxation purpose, SUVs which are above the 4-metre length, 1500cc engine along with 170mm ground clearance attract excise of 30 per cent as against 27 per cent earlier.

Most of the SUV models from M&M, even including its utility vehicle Bolero, fall under the new definition except its Quanto. Maruti Suzuki 's multi-purpose vehicle Ertiga and Renault's Duster, the hot sellers in the market, have escaped the higher tax burden.

M&M said it had hoped that the representations made by the Minister of Heavy Industries, Chairman Finance Committee, Society of Indian Automotive Manufacturers and other automotive companies would make the government reconsider the additional excise duty on SUVs proposed in the Budget 2013.

The company said the government's decision to impose higher excise duty on SUVs was creating an uneven playing field between companies and is totally changing the competitive scenario.

Initial analysis shows that industry sales of SUVs on which excise duty has been increased by 3 per cent have gone down by 14 per cent in April 2013 as compared to last year, the company said.

M&M stock price

On December 19, 2014, Mahindra and Mahindra closed at Rs 1222.35, up Rs 8.15, or 0.67 percent. The 52-week high of the share was Rs 1421.00 and the 52-week low was Rs 847.00.


The company's trailing 12-month (TTM) EPS was at Rs 58.92 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 20.75. The latest book value of the company is Rs 270.60 per share. At current value, the price-to-book value of the company is 4.52.

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