Will Excise Duty Hurt Auto Industry Harder

Disappointed by government’s move to discontinue excise sops for cars and consumer durables from January 1, 2015 , Society of Indian Automobile Manufacturers President Vikram Kirloskar said the move will make it tough for the auto industry to sell vehicles. According to him, the overall auto industry has been hurt even with a lower duty and so, with a high duty it is going to be even harder.

Kirloskar said that in the past 12-14 months the industry has worked very hard to squeeze its costs which will continue now. “Everyone down the value chain, the suppliers – a whole lot will be under more and more pressure to reduce costs which means more efficiency. I do not know what effects it will have on labor but there are bound to be some effects if the sales don’t pick up,” he added.

We need to grow the manufacturing sector and see how to increase the volumes out here because it is one fundamental thing which is at the bottom which the government should consider. We persuaded the government in the last two years and they reduced the excise duties which had gone up very high. They reduced it in the last Budget and the present government also continued it till December.

Around 30 percent on an SUV, the SUV sector in the last couple of months has actually come down. If you look at the overall picture, maybe our company has not been so badly hit but overall it has been hurt even with a lower duty. So with a high duty it is going to be even harder. And 30 percent is a huge duty plus in addition to that there are road taxes, the whole thing is crazy. The whole thing doesn’t make sense.

I do not know what effects it will have on labor but there are bound to be some effects if the sales don’t pick up. We have 40-50 percent excess capacity in the industry. I have been asking the government to say this is the big opportunity. It is very easy to grow sales, grow taxes if you can grow demand. Increasing prices is not going to grow demand. We are going to be stuck in a situation where we are just going to squeeze ourselves more in the next 12 months unless interest rates come down. You are absolutely right on the disposable income.

Indian-auto

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