February can be a good or a bad month for automobile manufacturers. Bad because sales dip during February as consumers, especially salaried people like me, hold back their buying plans hoping that the Finance Minister will make their favourite set of wheels a little cheaper.
In some years, it turns out to be a good month when the consumers' (and the manufacturers') hopes are met, and the sales graphs shoot up, a day after the Budget. This happened last in February 2006 when the excise duty was slashed from 24 per cent to 16 per cent. The slash, however, was meant only for the small car segment, with complicated definition of a 'small car'.
This year, carmakers are expecting the Finance Minister to do away with the special treatment to segments and offer the 16 per cent excise duty across all passenger vehicles, from the small Maruti 800 to the big Scorpio. So, what may happen on February 29 that will impact the consumer directly?
If the representatives of the industry body, in its meeting with the Heavy Industries and Finance ministries next week, manages to successfully convince the powers-that-be then…
We'll be able to buy any car of our own choice and not bothered by the fact whether it falls in a certain sub-segment of the small car category.
A small car would be defined only in terms of length. (The Auto Policy of 2002 prescribed promotion of small cars with a length of upto 3.8 metres. Currently, the cars attracting the 16 per cent duty are upto 4 metres in length and have a petrol engine of upto 1200cc or a diesel engine of upto 1500cc).
Driving a car running on a cleaner fuel/technology like CNG, LPG or Hybrid would attract incentives.
There would be only one cess – education cess. The excise duty on 2-wheelers will come down by half, to 8 per cent.
The above are some of the proposals that are likely to be carried over from the last year's list of memorandum from the Society of Indian Automobile Manufacturers -- the body representing all the key automobile manufacturers in India.
The industry body also has another point to debate on why should the FM listen to its proposals. Currently, the automobile industry contributes to 5 per cent of the country's GDP, and according to its projection for 2016 (when the industry is expected to touch 145 million USD) that figure will double.
Any step to promote the industry (read cheaper cars and/or bikes) will be a shot in the arm to the industry's plans. Call it the after-effect of the 2006 Budget or anything else, compact cars continue to grow faster than the overall industry.
In 2007, compact car sales clocked a 20 per cent growth as against 15 per cent in the overall car market. After the 2006 Budget, small cars became cheaper by 12,000 to 25,000 rupees (in the case of Maruti, as it was the biggest beneficiary of that move) and after the 2007 edition a small 1 per cent cess was added.
What will happen this time around? The industry and prospective car buyers will keep their fingers crossed! Should the Finance Minister agree to the proposals of the group representing the second largest 2-wheeler market, 11th largest car market, 4th largest commercial vehicle market, or will other pressing issues like education and infrastructure or rural development be given priority? Of course the latter, one would say...but as consumer one would also like the FM to help make his/her favourite set of wheels a little cheaper!
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