Owning Cars Should Get Cheaper Next Year: M&M

Automakers expect little relief from Finance Minister Arun Jaitley in the upcoming Budget after the government withdrew the excise duty benefits effective January 1.

But the absence of an excise duty cut should not deter auto buyers from looking forward to good days as far as ownership costs are concerned, said Mahindra & Mahindra's Pawan Goenka. Weak commodity prices and the likely cut in interest rates will make owning vehicles more affordable in the next financial year, he added.

Excise duty on small cars, scooters, motorcycles and commercial vehicles was reduced to 8 per cent from 12 per cent in the interim Budget announced in February 2014. For SUVs, excise duty was cut to 24 per cent from 30 per cent; for mid-sized cars, to 20 per cent from 24 per cent and to 24 per cent for large cars from 27 per cent.

In June 2014, the new government led by Narendra Modi extended the excise duty concessions by six months to December 31, 2014. The auto industry wanted further extension of the duty relaxation, but the Modi government decided against it.

"I do believe that the worst days for automotive industry are behind. Obviously it would have been nice if the excise duty had not increased as it did on January 1, but one has to accept that and move forward. One cannot keep talking about excise duty always," Mr Goenka said. (Watch)

Tracking the sharp fall in inflation, some economists have forecast rate cuts amounting to 100-125 basis points during the course of the next fiscal. Low interest rates will lead to substantial savings on EMIs on auto loans, analysts say.

Falling EMIs, coupled with falling fuel prices, is likely to lift the demand for automobiles, analysts say. The crash in global crude prices has already led to a sharp reduction in petrol and diesel prices. Petrol prices in Delhi are retailing at Rs 57 per litre as against Rs 74 per litre in June 2014.

Auto industry body SIAM or Society of Indian Automobile Manufacturers president Vikram Kirloskar earlier told NDTV if excise duty on automobiles is kept untouched auto sales would see an on-year growth of around 3 per cent during the calendar year ending December 2015. However, if Mr Jaitley decides to cut it later this month in the Budget, auto sales could see a 7-8 per cent growth.