|A lady watches the telecast of the budget at an electronics
showroom in Calcutta on Thursday. Picture by Kishor Roy Chowdhury
New Delhi, Feb. 28: The latest Porsche car or Harley Davidson bike are set to get costlier with finance minister P. Chidambaram today hiking the import duty on premium cars and motorbikes.
The budget for 2013-14 has also increased the tax on sports utility vehicles (SUVs), which has been showing strong sales growth in an otherwise struggling market.
While car makers and analysts forsee an immediate blip in demand, they said any price hike resulting from an increase in taxes would not impact the sale of high-end cars, bikes and utility vehicles in the long run. The move is also likely to increase domestic manufacturing of premium cars.
Stating that the affluent class in India will not “mind paying a little more” for their Ferraris, Lamborghinis or Ducatis, Chidambaram said, “I propose to increase the duty on such motor vehicles from 75 per cent to 100 per cent and on motorcycles with engine capacity of 800cc or more from 60 per cent to 75 per cent.”
“While aspirational products such as the Ferrari and Ducati may not have an immediate effect on demand, it may slow down the long range plan for India,” said Ashish Chordia, chairman of Shreyans, which is the exclusive importer of the Bombardier, Ducati, Ferrari and Maserati.
Italian luxury sports cars such as the Ferrari California, 458 Italia, 599GTB Fiorano are available in India at prices starting from Rs 2.2 crore, while the Aston Martin costs Rs 1.3-2.9 crore. These cars will see a price hike of around 25 per cent.
The 20,000-unit premium car market in India is expected to grow 30-45 per cent annually. Analysts said around 3,000-3,200 units of premium cars are imported as completely built units annually and this segment is impacted by the duty rejig.
“As of now, we will not increase the price of Suzuki superbikes. Given the considerations that go into the purchase of a superbike, we do not foresee a significant change in market size or demand patterns,” said Atul Gupta, vice-president (sales and marketing), Suzuki Motorcycle India.
Superbikes, including Harley’s SuperLow, Suzuki’s Hayabusa, Honda’s CBR1000RR and Yamaha’s R1 and having a price tag of Rs 7 lakh or above, will become costlier by around 15 per cent because of the excise hike.
The budget has also proposed to hike the duty paid by the SUVs makers to 30 per cent from 27 per cent while exempting those used for commercial purposes. “SUVs occupy greater road and parking space and ought to bear a higher tax,” Chidambaram said.
Sales of utility vehicles rose 57 per cent between April and December 2012 against a 2 per cent fall in car sales. Between April 2012 to January 2013, overall car market grew just 4.66 per cent.
“Given the growth in that sector, that’s going to hit very hard. I was surprised by that,” said Lowell Paddock, managing director of General Motor India, adding that specific details of the SUV duty hike would be important in determining its impact.
Shares of Mahindra and Mahindra and Tata Motors fell as much as 2.5 per cent and 2 per cent, respectively, after the budget announcement.
“I don’t foresee any significant impact on the SUV sales because of a 3 per cent hike in excise duty. Consumers now are more mature and make purchases based on other factors such as fuel-efficiency, styling, comfort and safety features,” said Abdul Majeed, auto expert at consultancy firm Price Waterhouse Coopers.