Car makers skid on ‘small’ talk

The automobile industry has been virtually ignored in the Budget, and this may be because Motown came across as a house divided to the mandarins of North Block. The industry is divided right down the middle over the “small” car issue: what does and does not comprise a “small” car and whether all cars should be charged the lower 16% excise. While small car makers have made no bones about their opinion that small vehicles should be incentivised, manufacturers of sedans and luxury cars wanted a level-playing field through excise reduction. Major car makers are also in opposing camps when it comes to what parameters should define a small car.This difference of opinion may have spoilt any chances of the industry’s demand list being met. During his interaction with the industry on Thursday, the FM said as much. “We are focused on making India a hub for small cars and duties were reduced last year.” Last year, excise levy was cut from 24% to 16% for cars which are up to 3.8 metres long and sport either a 1200 cc petrol engine or a 1500 cc diesel one. This year, the industry had sought the extension of the lower 16% rate to all cars — small, sedans and luxury cars.Also, it had asked for excise on two- and three-wheelers to be cut to 8%. An expert said 2006’s excise sop was justified by the huge growth small car sales have logged since then and keeping in mind the FM’s stated objective of making India a small car hub, there seemed no point in encouraging the manufacture of larger vehicles. During the first 10 months of this fiscal, the growth in small car domestic sales was a jaw-dropping 30% at 6,05,112 units against 4,62,718 in the same period last year. During the same period, larger cars logged only a 14% growth at 1,97,358 units (1,73,087). And even the confusion on how long should a small car be — 3.8 metres as per Auto Policy or 4 metres as per Auto Mission Plan — may not dampen the growth of such vehicles in any significant manner.According to estimates by SIAM and ACMA, auto industry production is expected to grow by over 20% this fiscal and about 15% next fiscal. So, when the auto industry is already on auto pilot, the FM’s apathy towards it does not appear all that unjust!

SOURCE : DNA MONEY