In reaction to finance minister Arun Jaitley’s announcement of implementation of infrastructure cess and additional luxury tax on cars in the Budget, automakers have started increasing prices of vehicles.
On Thursday, Maruti Suzuki, India’s largest carmaker announced that it will increase prices of all its products. “Following the infrastructure cess on automobiles in Union Budget 2016-17, ex-showroom prices of the Maruti Suzuki’s cars would go up in the range of Rs 1,441 to Rs 34,494 across its models,” the company said in an email statement.
The finance minister has proposed a cess of 1% on all small and CNG vehicles, 2.5% on diesel cars, and 4% on cars with a certain engine size. The introduction of the cess is due to the rising concerns about pollution level, and comes at a time when the automobile industry is fighting against an unstable rupee, and rising input costs, that are already putting pressure on the margins of companies.
It’s not only Maruti Suzuki, other car makers have also reacted to the Budget proposal. Hyundai, the country’s second largest carmaker will increase the prices of all its vehicles, including its entry level car Eon by Rs 3,000, its SUV Creta by Rs 26,000-45,000 and its for its flagship Santa Fe by Rs 80,000. A Hyundai spokesperson said that while there is an impact of the additional cess, the price increase is also because the expectations of carmakers from the government were different.
Tata Motors increased its prices by at Rs 2,000 for its entry level Nano, and up to Rs 35,000 for the Aria SUV. A company speokesperson said that the price increase is line with the infrastructure cess.
The additional 1% luxury tax imposed on luxury cars has impacted luxury car prices too. Mercedes Benz is the first to announce price hike of 3-5% across its portfolio of cars. “The introduction of additional duties and taxes in this year’s Union Budget has adversely affected our pricing. On top, the steady rise of input costs against the backdrop of a weakening Indian currency has further eroded our bottom-line,” said Roland Folger, managing director and CEO at Mercedes-Benz India.
Other luxury car makers – BMW, Audi and Jaguar LandRover are yet to announce price increases, but it is just a matter of time. Also, for the rest of the carmakers, the price hike will be implemented sooner than expected, mostly by the end of the week.