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Union Budget 2011-12: Car prices to remain unchanged
February, 28th 2011

Its right time to buy a new car as the prices will remain unchanged with the Budget keeping the excise duty on automobiles intact.

"With interest rates and raw material prices going up, the government decided to retain the current levels of excise duty," said Umesh Karne, analyst at Bric Securities .

Automobile sales, which has been growing at the rate of 30%, will continue to ride high though the sector is still grappling with rising input and fuel costs. Some analysts feel that continuation of duties will give an opportunity for automobile companies to go for increase in prices which were postponed due to the assumption that price hike would lead to reduction in demand.

"This gives an opportunity to car makers to increase prices soon,"said Mahantesh Sabarad, analyst at Fortune Financials .. In April-January, car sales jumped 31% to 15.99 lakh units, while two-wheeler sales rose 27% to 96.71 lakh units

For the 2006-07 budget, government had drastically cut excise on small cars, vehicles under four metres and 1,200 cc petrol and 1,500 cc diesel engines, to 16% from 24% that catapulted massive demand as the huge price difference expanded domestic market to over 2 millions units/year.

Currently small cars which are less than 4 metres in length and have engine displacement of up to 1200cc petrol or 1500cc diesel, are charged 10% excise duty, and the higher powered vehicles at 22%. Cars more than 2000cc have to pay an additional Rs 15,000.

While key automobile stocks were trading lower ahead of the finance minister's budget speech, shares of Tata Motors , Maruti Suzuki, Mahindra & Mahindra and Bajaj Auto went up post Budget announcements. Except for Hero Honda which was down by 0.29%, the other key stocks of Tata Motors, Mahindra, Bajaj Auto, and Maruti Suzuki were up 0.81%, 6.32%,1.61% and 4.51% respectively.

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