As a result of the finance minister's having reduced excise duty on small cars from 16 per cent to 12 per cent, several auto majors had immediately announced major price cuts effective April 1. (See: Maruti cuts car prices up to Rs18,000; Hyundai follows with cuts of up to Rs19,000).

After the initial announcements by Maruti and Hyundai, General Motors has also announced a lowering of the prices of the two small cars in its repertoire - the Chevrolet Spark and the Chevrolet UV-A. The price cuts are expected to be around Rs7,000 for the first and Rs.14,000 for the latter.

In the context of the Indian Budget and taxation laws, small cars are defined as being less than four metres in length, and having maximum engine capacities of 1.2 litres and 1.5 litres for petrol and diesel-powered cars respectively. These specifications had been codified last year when the finance minister had reduced the duty on such cars from the earlier 24 per cent, which all cars were subject to.

However, this preferential treatment towards small cars has expectedly caused discontent amongst manufacturers of luxury vehicles. Dr. Wilfried Aulbur, CEO and MD of DaimlerChrysler India, said that such continual preferential treatment would continue to increase the already visible gap between small and premium cars. However, with the bulk of India's new car buyers going for smaller vehicles, few will have reason to complain.

The finance minister has also kept a lower income level in mind when he similarly decreased the duty on three and two-wheeler prices to 12 percent from 16 per cent.

Owing to their lower base prices, corresponding reductions are expected to be modest in monetary terms as compared to cars. While buyers of high-end bikes like the CBZ can expect a price reduction of Rs2,000, for lower-end products like scooters and entry-level motorcycles, the cuts could be much lesser at around Rs1,000. 

Leading manufacturers like Hero Honda and Kinetic have already expressed their willingness to pass on the effects of the duty cut to customers, although they had been lobbying for a reduction to 8 per cent before the Budget.

Choked lungs of urban citizens may get marginal relief owing to the budgetary reductions in excise duty for buses and hybrid vehicles. While buses will now be levied an excise duty of 12 per cent, hybrid vehicles, which use a mix of traditional power trains and electric motors, will be taxed at 14 per cent as compared to 24 per cent earlier. More buses will encourage public transport, feels Ashok Leyland's managing director R. Seshasayee, and lead to reduced pollution.

Although there are no hybrid vehicles on Indian roads, they are a distinct possibility in the near future. While foreign manufacturers like Toyota and Honda are planning to bring in the Prius and Civic hybrid as CBUs, homegrown major Mahindra & Mahindra has already showcased a hybrid variant of its bestseller Scorpio at the recent Auto Expo which it soon intends to introduce commercially. (See: Indian SUVs: Spawned on M&M drawing board)