Impact of Budget on the Automobile Sector

The automobile industry in India had its eyes on this year’s budget session but eventually was disappointed as no such beneficial plans have been instigated this year and the scenario thus remains the same. Last year seemed to have a negative impact on the industry owing to the fact that the government imposed revised interest rates and adding to that, the prices of fuel kept escalating at an alarming rate. This year the situation has only deteriorated as the government has decided to hike the excise duty by 2 percent and as a result, there has been a negative impact on the industry. And now, the news is bad for all those who are looking forward to buying new cars as following the budget session of 2012, the prices of all the cars and bikes are said to see a subsequent increase. The growth in the line-up of passenger cars over this prospective year has been a meager 15% and now since excise duty has been increased and also the prices of the cars, thus this figure has a huge chance of falling down this year.

Impact of Budget on the Automobile Sector

The one segment of market which suffered a major blow is the luxury car market in which the cars have sustained a large price rise and as a result customers will now be having second thoughts before shelling out on a luxury car. Earlier the critics had made a prediction especially for the luxury car market that the sales percentage of these cars will see a 6% increase from 22 to 16% but instead the duty has been increased by 24% and thus the cost of the cars is set to rise up. Adding fuel to fire, the import duty that is slapped on all the cars from outside which earlier was 50% has now been increased to 75% and this will be slapped only on those cars which are priced above Rs. 20 Lakhs.

On the contrary the finance minister has given relief to diesel cars by removing any extra tax on the vehicles which run on diesel. But the increase in the excise duty on the cars will now impact the industry in the negative manner and thus luxury car makers stand a big chance of losing confidence of the customers. Michael Perschke who heads Audi India said that the decision of the government to increase the excise duty and the import duty on luxury cars is something that the car makers did not see coming and he believes that bringing this at a time which the customers of India are looking forward to buying fuel-efficient cars has taken a beating and now more and more people would be going for the small-segment cars. So thus Audi will be altering its strategies related to pricing their cars as no car makers wants to take risk of sustaining losses due to the decisions of the government and thus every luxury car maker in India is revising its prices.

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