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Buying a new vehicle in India is increasingly proving to be an expensive affair. Only two months after passenger vehicle prices were hiked across segments, the decision by the government in the Union Budget 2016 to levy infrastructure cess of nearly 5 percent on passenger vehicles has resulted in some carmakers raising prices again.
General Motors has raised prices of its entire range of Chevrolet vehicles by Rs 3,500 - Rs 51,000 depending upon the model and the variant. However, the price of the entry level LT variant of the facelift Cruze remains unchanged at Rs 13.95 lakh.
Hyundai Motor India Ltd and Honda Cars India had also recently announced a price hike across its entire range of cars. The Korean manufacturer’s cars will see a price increase in the range of Rs 2,889 to Rs 82,906 and Honda's vehicles will be dearer by Rs 4,000- Rs 79,000. Both price hikes are effective from March 1, 2016.
The move came a day after country’s largest carmaker Maruti Suzuki decided to raise prices of its models by Rs 1,441 to Rs 34,494 across the range due to the additional levy. However, smart hybrid models such as the Ciaz SHVS and Ertiga SHVS would not see an uptick in prices since they are exempt from the infrastructure cess, according to a company statement.
On Wednesday, March 3, 2016, Mercedes-Benz India announced that prices on all its vehicles in the country are set to go up by 3 to 5 percent, depending on the model, with effect from March 15, 2016. The carmaker cited the imposition of an ‘infrastructure cess’ as well as an additional ‘luxury tax’ announced in the Union Budget 2016 as one of the reasons for the price hike.
Similarly, Tata Motors has also increased prices of its passenger vehicles in the range of Rs 2,000 to Rs 35,000, effective March 1, 2016, the carmaker said in a statement.
Roland Folger, managing director and CEO, Mercedes-Benz India also cited an increase in input cost as a reason for the rise in prices. “Contrary to our expectation of some relief in terms of rationalisation of duties, the introduction of additional duties and taxes in this year’s Union Budget has adversely affected our pricing. Moreover, the steady rise of input costs against the backdrop of a weakening Indian currency has further eroded our bottom-line,” he said.
Finance minister Arun Jaitley proposed an infrastructure cess of one percent on petrol, LPG, CNG driven cars under-four-metres of length and engine capacity not exceeding 1,200cc, 2.5 percent on diesel cars under-four-metres length and with engine capacity of less than 1,500cc and 4 percent on other higher engine capacity cars, SUVs and larger sedans. He also proposed an additional 1 percent tax on purchase of luxury cars priced more than Rs 10 lakh.
The price hike, which comes at a time when the auto sector is grappling with weak demand, may result in a decline in sales in the near term. “The imposition of an infrastructure cess would increase prices of automotive products immediately. An increasing number of duties levied on automobiles is a cause of concern,” according to Pravin Shah, president and chief executive (Automotive), M&M Ltd.
More on the Union Budget 2016-17
Union Budget 2016-17: Cars and SUVs to get more expensive
Union Budget 2016-17: Auto industry says additional taxes deterrent to growth
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