Car makers quickly pass on excise cuts to buyers in flagging market

Following the excise duty cuts for car and two-wheeler manufacturers announced by finance minister P Chidambaram in his interim budget, most of India's car makers, including market leader Maruti Suzuki India, were quick to announce a reduction in the prices of their vehicles in a sagging market.

Maruti's price cuts range between Rs8,502 and Rs30,984 depending on the model. The entire benefit of the excise duty cut is being passed on to customers for the full range of models, the company said in a statement.

Maruti's biggest rival Hyundai Motor India has slashed prices by between Rs10,000 and Rs1,35,300. Honda Cars India, Volkswagen, Mahindra & Mahindra and Fiat also announced price cuts.

Finance Minister P Chidambaram proposed the excise duty cuts on 17 February "to give relief to the automobile industry, which is registering unprecedented negative growth".

Annual car sales in India declined for the first time in 11 years in 2013 as the auto industry reeled under a prolonged demand slump due to the economic slowdown.

Volkswagen cut prices of its cars in India by between Rs14,500 and Rs51,000. Unlike Maruti's bread-and-butter cars, Volkswagen sells higher-end models, for which the duty cuts are proportionately less.

Mahindra said the price reduction for its passenger vehicles is between Rs13,000 and Rs49,000. The company, which specialises in utility vehicles, lowered prices of its premium SUV, Rexton, by up to Rs92,000.

Fiat said its cars would be Rs8,000-12,000 cheaper. The company sells the Punto and Linea models in the country.

Hyundai Motor India Ltd echoed Maruti's statement that customers would get the full benefit of the excise duty relief across its models, from the Eon to the Santa Fe.

"The reduction in excise duty would substantially reduce prices, making cars more affordable. The quantum of benefit will vary from Rs10,000 to Rs1,35,300 across all the models," HMIL senior vice president, sales and marketing Rakesh Srivastava said.

Chidambaram cut excise duty to 8 per cent from 12 per cent for small cars, scooters, motorcycles and commercial vehicles; 24 per cent from 30 per cent for SUVs; 20 per cent for mid-sized cars from 24 per cent; and 24 per cent for large cars from 27 per cent.

German car makers Audi and Mercedes-Benz had announced price cuts on 17 February, after the Interim Budget was presented in Parliament.

Honda Cars India reduced prices of its models by up to Rs44,741 with immediate effect. "The reduction in duty will give the necessary boost to consumer demand and fuel growth in the auto industry. We are happy to pass on the benefit of the duty reduction to our customers," Honda senior vice president marketing and sales Jnaneswar Sen said.

Nissan Motor India slashed prices of its vehicles by up to 6 per cent from 18 February. The cut is on its Micra Active, Micra, Sunny, Evalia, Terrano and Teana models, Nissan Motor India said in a release.