Budget implications for the auto sector

Mohini Bhatnagar
29 February 2008

While the consumer goods sector will benefit from the Budget 2008 due to the raising of the tax exemption limit to Rs1.5 lakh from Rs1.1 lakh earlier the sectors that directly benefit from the Budget 2008 are the auto and pharma sector.

Clearly with the provisions for the auto sector of Budget 2008 the FM aims to boost sales of all small passenger vehicles - small cars and three-wheelers. In addition to this the provisions for the manufacturing sector in the Budget such as reduction in across the board excise duty to 14 per cent will benefit automobile sector in general.

The reduction of 4 per cent excise duty on small cars, two and three wheelers from 16 per cent to 12 per cent will provide cheer to small carmakers, two wheeler makers and bus makers.

The reduced duty applies to cars measuring less than four metres with petrol engines less than 1200cc and diesel engines less than 1500cc.

The provisions will benefit carmakers like Maruti Suzuki (Alto, WagonR, Zen Estilo), Tata Motors (Indica), Hyundai Motors (Santro, Getz, i10) and General  Motors (Spark)
According to a Hyundai official said the duty concession would enable the company to reduce the price of Santro by Rs 12,000 to 14,000, the i10 by Rs12,000-Rs15,000 and the Getz by Rs 14,000-16,000 on ex-showroom prices.

A General Motors spokesperson said that its small cars the Chevrolet Spark and Chevrolet U-VA, would see a drop in price ranging from Rs7,500-Rs14,000.