Prices of small cars will go up by Rs 6,000 and large cars by Rs 20,000 as manufacturers decide to pass on the increase in excise on
small cars, two-wheelers by 2% to 10% and large cars, multi-utility and sports utility vehicles to 22%. But so far, only Hyundai has announced a price hike in the range of Rs 6000 to Rs 25000, while other car makers are still studying the fine print.
"This will hamper growth in the short-term," said Pawan Goenka president (automotive) Mahindra & Mahindra.
The passenger car segment has been on a growth path post the fiscal stimulus package that was initiated from December 2008 . According to the Society of Indian Automobile Manufacturers, passenger car sales in the April-December period grew 25% to 12.16 lakh units, while that of utility vehicles grew 22% to 2.19 lakh units and multi-purpose vehicles grew 37% to 1.19 lakh units.
Industry estimates pegged car sales to cross 1.5 million units for fiscal 2009-10. Currently the entry level and compact cars constitute more than 60% of the car market, with sales at 9.53 lakh units, a growth of 27%.
However, analyts say demand outlook will continue to be robust as the price hike is not too high. "Prices will go up of products across the board, but with the personal tax outgo reduced , it augurs well for the consumer," said Mahantesh Sabarad, auto analyst of Mumbai-based Centrum Broking.
"The excise increase of 2% is not much and will eventually be passed on to customers," said Rajiv Bajaj, MD, of Bajaj Auto, the country’s second largest two-wheeler maker. Prices of two-wheeler products could see a hike of Rs 700 to Rs 1,500.
"We can’t expect the auto industry to grow at 25%, a sustainable growth would be 10-15%," said Rakesh Batra, national leader, automotive practice E&Y. "The increase in excise duty will have a negative impact in the short term," he added. With the global economy showing signs of improvement, there will be pressure on the cost in the long term..
