Brokerage house Citi does not see automobile companies gaining much from the excise duties announced in the Interim Budget on Monday.
"While this appears to be a positive catalyst for pushing demand growth in an otherwise adverse macro environment, upsides appear limited for now, given, 1) this rate cut is effective only for one month in FY14 and 1QFY15, given it was an interim budget and 2) further continuation of the new low rates will depend on the policy of the next government, hence preventing significant price cuts, we believe," said the Citi note.
Also read: Your dream car may come with a cheaper price tag now
Also, Citi does not expect vehicle makers to pass on much of the excise duty benefits to customers.
"We expect pass-through of rate cuts to customers to be limited, given 1) OEMs are facing margin pressures and 2) given the possibility of the rate cuts being reversed in the final budget (June’14), we do not think OEMs (original equipment makers) will cut prices only to hike them later," says the Citi note.
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