The Society of Indian Automobile Manufacturers (SIAM) had said it expected sales of cars and utility vehicle to grow below 4 per cent in the current fiscal year, but it said on Friday higher taxes from January would dent sales, especially of small, cheaper cars.
"We were anticipating that the excise concession will continue. Now that it has been withdrawn, it will bring down growth further, but we hope it will not go in the negative territory," Sugato Sen, deputy director-general of SIAM, told reporters on Friday.
A tax break was first granted in February to revive sluggish car sales and later extended until the end of 2014. Automakers had been hoping the concession, amounting to 3-6 per cent of the car's factory gate price, would continue into 2015.
Instead, the government ended the concessions in December.
"We just have to take the increase and take whatever further volume drop happens," Pawan Goenka, president of Mahindra & Mahindra's automotive and farm equipment sectors, told Reuters after the government ended the sops.
He warned that lower volumes could mean plant shutdowns and layoffs, though a widely expected drop in interest rates this year could offset that.
Total passenger vehicle sales in India rose 12.4 per cent to 209,025 vehicles in December from a year earlier, according to SIAM.
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