Hyundai Motor India is expecting the small SUV segment, where it is present with models like the Exter and the Venue, to witness the highest growth following the Goods and Services Tax (GST) rate rationalisation, according to a senior company official.
Prior to restructuring, all internal combustion engine (ICE) cars attracted a GST of 28% in addition to a compensation cess of 1-22%, depending on the length, engine capacity and body style. On the smaller cars, the total tax would be 29-31% (GST + compensation cess), while the bigger as well as luxury models would attract total tax from 43-50% (GST + compensation cess).
With rationalisation, compensation cess on vehicles has been removed, and all ICE cars are under two GST slabs, 18% and 40%. While the 18% GST slab is for smaller cars, the 40% GST slab is for bigger and luxury models.
For reference, the ex-showroom price of any vehicle was inclusive of GST and compensation cess earlier. But with compensation cess withdrawn and GST rates restructured, the total tax incidence on all types of cars has decreased, resulting in lower prices in the GST 2.0 regime.
Hyundai has already announced that it will pass on the complete benefit of the GST rate rationalisation on cars to its customers. The new GST rates as well as the new car prices will become effective from September 22, the first day of the nine-day Navaratri festival.
In the GST 2.0 regime, Hyundai cars will become cheaper by as much as Rs 2,40,303. While the Exter will witness a price cut of up to Rs 89,209, the Venue will see its price dropping by up to Rs 1,23,659. The price reduction will be up to Rs 72,145 on the popular Creta.
Talking to reporters on the sidelines of the 65th SIAM Annual Convention, Hyundai Motor India Whole-Time Director and Chief Operating Officer Tarun Garg said: "I have spent 32 years in the automobile industry. In the last 20 years, I have never seen this kind of cut. In the past, it used to be 4%. Once it was 6% and then 8%. But this is beyond anything we have seen in the past. 11-13% on small cars and 3-10% on the big cars. It is a very big cut coming at the right time."
"Over the last 20 years, we have seen that after 4-5 years of very good growth, a year of dip happens, and it normally stays for 12-16 months. Then, you need some kind of spur to bring it back. CAGR is always 4.5-5%. But for 4-5 years, you see a good growth like 8%, 9% or even 10%, and then the dip happens. This fiscal, the industry is almost 2% down. There were clearly dangerous signs of slipping into negative territory. But the GST cut is a big impetus," he added.
Garg observed that although the industry has been down by almost 2% during the period from April to August, it should be back to the CAGR growth of about 5%. "We can look at a 5% growth from September till March, which means a swing of 7%," he said.
According to him, as cars become more affordable due to the GST cut, some first-time buyers will come in. Hyundai's first-time buyer share has gone up from 31% in FY20 to 40% now.
"The SUVs in the sub-4 metre segment will see the highest growth. That segment represents both affordability and aspiration. While affordability is very important, we have seen that over the last 2-3 years, aspiration has gained importance as well," he said.
Garg believes that the GST cut will result in a lot of customers moving to the entry SUV and small SUV segments. "The Exter and Venue segments could see substantial growth. The maximum reduction of 11-13% has happened there. In terms of value, it is a substantial reduction. Along with the 8th Pay Commission and the income tax relief, those segments will grow," he said.
Hyundai sold 77,412 units of the Exter and 1,19,113 units of the Venue in FY25. While the company will launch the new generation version of the Venue on October 24, Moneycontrol exclusively reported on September 9 that the updated Exter will enter the market next year.
The Exter segment recorded overall volumes of 2,73,984 units and the Venue segment of 10,84,611 units in FY25.
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