Budget 2012-13 bowls over car lovers’ expectations by pulling up the excise duty on all vehicles. The imported vehicles would be the ones bearing the maximum burden from this hike as the government has increased the customs duty on SUVs to 75 percent from 60 percent. The heavy vehicles or those with engine capacity of more than 1,500cc have seen a rise of 5 percent which has gone up to 27 percent from the current 22 percent. Upgrading a sedan or buying an imported SUV has become expensive overnight. The car prices were hiked with immediate effect soon after the announcement of the budget. The sedans like Honda City and Hyundai Verna will become costlier by more than Rs. 11,000 and Honda Accord that falls in the premium segment will become expnsive by Rs 80,000 . The luxury cars like Mercedes Benz C-Class would become pricier by about Rs. 1.5 lakh on the entry level model. The domestic SUVs like Mahindra XUV 500 will become dearer by Rs. 35,000 on the top-end model.
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Every segment of the Indian auto market including the small cars and two-wheelers has been hit by this undesired 2 percent increase in the excise duty. The car makers have no option other than passing this burden down in the hierarchy to the customers. The mainline car makers like Tata, Hyundai. Maruti, Mahindra, Ford, Toyota and General Motors along with the luxury car makers like BMW, Mercedes Benz and Audi have increased the prices of their products in response to this hike. The overall excise duty on the cars and the two-wheelers has increased from 10 percent to 12 percent, resulting in the price hike between Rs. 2,500 and Rs. 8,000 in case of small cars and between Rs. 500 and Rs. 2,000 in case of two-wheelers. The high inflation and interest rates coupled with the negative economic situation was already making the Indian auto industry go through a tough time, the price increments at this time would not be productive.
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According to Shinzo Nakanishi, Managing Director of Maruti Suzuki India, the automobile industry which was already fighting a slowdown will be highly affected by this increase in the excise duty. For the auto industry in the budget 2012-13 the most feared and speculated thing was the additional tax imposed on diesel. The reason for this anticipation was the demand of lifting the subsidy on the fuel by certain sectors of government and the green lobby as they feared that the subsidized fuel was being misused. The small cars in India suffered a hike of 2 percent in the excise duty from 10% to 12%, cars like Tata Indica, Maruti Alto, Hyundai I10 and Ford Figo saw the increase from 10 percent to 12 percent. The larger cars like sedans and SUVs suffered a major blow because of the exorbitant tax treatment.
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