The 2012 Budget brings no great relief to auto industry

The Finance minister has finally opened the pressure valve of the Auto industry. The Budget has got in a few good news and equally bad news.

We have made a small synopsis on the same which well to understand the budget effect on the auto industry.

Lets us discuss the good news first

No additional tax on diesel cars

The Budget has spared diesel vehicles from the much feared additional tax. There was a lot of news of an extra tax ranging from Rs. 50,000 to 80,000 tax to be slapped on diesel cars. Society of Indian Automobile Manufacturers (SIAM) had said that fear of diesel tax and lack of a clear roadmap on diesel pricing led auto companies to hold back investments of more than Rs 3,000 crore in India.

However with no additional tax on diesel vehicles firms such as M&M, Hyundai and Maruti Suzuki are expected to press ahead with plans to expand engine capacities in this segment.

Hybrids to cost less

The Excise duty on replacement batteries has been reduced from 10% to 6%. Further, the excise duty on other “specified parts” of hybrid vehicles have also come down from 10% to 6%.

Full exemption from basic customs duty and special CVD with concessional excise duty or CVD of 6 per cent on some parts of hybrid vehicles is being extended to specified additional items and lithium ion batteries imported to make battery packs for electric or hybrid vehicles.

The Bad news

Small cars,Sedans and SUVs to cost a lot more. A 2% hike in excise duties will raise prices across the board. At the upper end of the car segment, the excise burden has been hiked from 22% to 24% for cars with engines of between 1.2 litres and 1.5 litres; for cars powered by engines of 1.5 litres and above, the duty is now 27%.

Segment	Old Excise Duty	New Excise Duty
Small Cars: Less than 4 meters in length and with engine capacity smaller than 1.2L (Petrol) / 1.5L (Diesel)	10%	12%
Medium-sized Cars: Over 4 meters in length, but with engines smaller than 1.5L (Petrol or Diesel)	22%	24%
Large Cars Over 4 meters in length, and with engine size larger than 1.5L (Petrol or Diesel)	22% + Rs. 15,000 (fixed duty)	27%
CBUs (Fully Imported Cars)	60%	75%

Ssmall cars are likely to get dearer by between Rs 2,500 and Rs 8,000, twowheeler prices are likely to move up by between Rs 500 and Rs 2,000.

Sedans are set to be dearer by upwards of Rs 11,000 (for cars like Honda City and Hyundai Verna) to Rs 80,000 for premium ones like the Honda Accord. Domestic SUVs like XUV500 will see an increment of Rs 35,000 on the top-end model while an entry luxury car like Mercedes C-Class (now Rs 30 lakh) will be dearer by about Rs 1.5 lakh.

Increase in service tax from 10% to 12%

In general all the cars will now be dearer by 2%

Body building units of CVs will now attract an ad valorem duty of 3% instead of a specific duty of Rs 10,000; this is likely to be an additional burden on truck makers

Auto makers are soon going to announce price hikes on all models. So be ready to pay more your car or bike.