Prices of Honda Activa and Unicorn, among other scooters and motorcycles, are expected to go down in the range of 3-5 percent from July 1 with the adoption of Goods and Services Tax (GST), a senior official of the company said.
As against the earlier belief that GST would ring in a price increase of around 1 percent on two-wheelers, manufacturing companies and their parts vendors have been working overtime to calculate the exact impact of the new tax.
As a result, while companies like Bajaj Auto and Eicher Motors-controlled Royal Enfield have already slashed prices, Honda, the country’s second biggest two-wheeler maker, will cut prices at the start of next month.
“While the price cut will differ from state to state and product to product we expect it to range between 3-5 percent on an average. Whatever benefit there is (arising from GST) we will pass it on to the customer”, said YS Guleria, Senior Vice President, Sales and Marketing, Honda Motorcycle and Scooter India.
Pune-based Bajaj Auto, India’s third biggest two-wheeler maker, cut prices by up to Rs 4,500 last week. Chennai-based Royal Enfield followed suit announcing a cut on select models. Others like Hero, TVS Motors, Yamaha and Suzuki are also expected to join the bandwagon on July 1.
Prices of bikes having engines more than 350cc will attract a cess of 3 percent over and above the 28 percent duty under GST. This will impact Royal Enfield, some models of Bajaj-KTM and all premium motorcycles many of which are assembled in India.
A senior industry executive on condition of anonymity said, “It was only after the Finance Ministry came out with a detailed list of items falling under specified tax brackets that we got an idea about the impact of the final rates. GST not only impacts alone but it impacts our vendors, too. There will be a net tax gain or loss based on this calculation”.
The onset of GST, however, has led to desperate attempts by dealers to exhaust their current stock. Pre-GST unsold stock would be unproductive for the dealer and, therefore, many dealers are running showrooms with unusually low inventory presently.
Dealers are enticing customers with discounts to liquidate stock not just on two-wheelers but on cars as well. Discounts ranging from 5-15 percent are doled out and will go on till end of this month.
Two-wheeler companies are eager to make up for the loss in volumes and the substantial hit on margins experienced during the transition to BS-IV from BS-III on April 1. There is also uncertainty over consumer sentiments after the implementation on July 1.
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