ET reported that consumers have begun coming back to car showrooms following the recent cut in interest rates. But manufacturers say a further excise cut would fuel faster growth in the coming months.
According to sourced, a sustained reduction in excise duties since 2003 led to a 20% to 24% drop in car prices fuelling growth in the passenger car market. In 2008, the government levied an additional excise of INR 20,000 on cars powered by engines above 1500 cc.
However, a reduction in excise duty to 24% in 2003-04 led to a 27% growth in car volumes to 9 lakh units. However, growth during 2005-07 fell in spite of a 10% GDP growth rate. Analysts said there was no excise duty reduction during those years indicating a direct co-relation between the fiscal measures and car sales. In 2007-08, a reduction in excise duty to 16% fuelled a 12% growth in car sales to 15.5 lakh units and sales in 2008-09 was flat at 15.5 lakh units.
New launches in the mass segment and focus on rural markets are expected to drive growth for car companies, currently grappling with single digit growth rates. Maruti Suzuki, Hyundai, General Motors, Honda and Toyota have managed to record steady sales growth, thanks to new launches.
An analyst from a Mumbai based brokerage said sales have been under pressure for players, such as TATA Motors, Ford and Hindustan Motors in the recent past. Customers are also preferring new competitively priced cars with higher fuel efficiency and better technology.
In recent times, auto manufacturers have stepped up localization in new launches to price them competitively. Mr Rajiv Dube president of passenger vehicles TATA Motors said “New launches and value for money pricing are key sales drivers.”
