Excise duty cut leaves car companies in a fix



The government’s decision on Monday to reduce excise duties on cars, SUVs and MPVs across the board was so unprecedented that it has created a peculiar problem for the industry.

While the reduction in taxes was much needed and the industry had been lobbying hard for it over the last 6 months, the inventories piled up at with the dealers that were charged at the higher rate of duty is a headache for the manufacturers. And as the sales have been underwhelming over the last 7-8 months, unsold stocks are high both with the dealers as well as the companies’ own supply chain.

On an average, any car maker carries with itself an inventory of 2 weeks and in an ideal situation–10 days. But estimates suggest that currently the inventory level is at least 6 weeks and in some cases stretches to over 10 weeks. In effect, there are some companies where stocks dating back to 2013 are still unsold with the dealer.

On any given day, these cars are a problem and could be very difficult to liquidate. And in cases like this one, when taxes go down, it assumes significant financial implications. While the company and the dealer has paid a higher duty for the car as excise duty is charged at the factory gate, when it actually gets to the intended customer for delivery, the prices would change and customer would be obliged to pay the lower value. It is a situation that results in a windfall when excise duties go up but it turns into a loss to be absorbed when they go down.

Considering that around 150,000 cars are stuck as inventory across the country and the average ex-factory sticker price of a car is Rs 6 lakh (mind you it would include the marquee super cars as well), the entire industry is sitting at a potential loss of Rs 360 crore. This amount would either have to be absorbed by manufacturers entirely on their own, or in conjunction with their dealers. Or, some manufacturers could be inclined to pass on only part of the excise duty reduction to the consumers to account for the loss in inventory.

The peculiar problem is the reason most of the companies have gone into a huddle and were not able to decide by how much prices ought to be reduced. As a car buyer, if you were waiting for the budget you may now laugh your way to the bank at the expense of your manufacturer.

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  • Abu Ahmed

    RSS is the supporter of erstwhile Rajas and their mini Rajwadas – what Mayawati has come up with would surely lead to that situation in the near future. I would not be surprised if she wins the elections with a thumping majority on the basis of this pro-RSS UP balkanization plan.

    [Reply]

    Anonymous Reply:

    Stop bashing RSS just because you hate them…Rajas and Rajwadas were always supported by Nehru and now Congress has many ministers, MPs and MLAs from Rajwadas.

    Your each and every argument is based on your communal mindset.

    BJP is of the view that smaller states are easy to govern and not what you claim. It is Congress who is into the business of appeasing separatists be it rajwadas or muslims.

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    Abu Ahmed Reply:

    Buddy, I need not hate the RSS – its policies are anti-India and pro high-caste Hindus only. The day the RSS accepts Muslims in its fold and grants them due recognition, I would jump to join it, but I kow it will not.

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    Anonymous Reply:

    RSS is Communal no doubt but it is not anti-India. Coming from a muslim, this is a joke.
    It is not a casteist org. because there are many dalits and OBCs in its top leadership.

    The day muslims start accepting India as their own rather than Saudi and pakistan, RSS will definitely accept them.

    Let us not forget that muslims divided India..they divided many nations world over..there is no RSS in those nation. The muslims are the only problem. Look within.

    Abu Ahmed Reply:

    The first organization which spoke of 2 nations in un-divided India was the Hindu Mahasabha much before Jinnah took the idea up. Brush up your history buddy. 1857 Ghadar is the best example of Hindu-Muslim unity – after that the British took upon themselves to divide Hindus and Muslims to serve their interests. Pakistan was a place for Indian Muslims till the 50s. after 1965, Pakistan ceased to be an option for Indian Muslims. Saudi Arabia was never, I repeat, never a place for Indian Muslims to settle down. We bow before before the Kaaba, which happens to be geographically in Makkah, SA, but not before any political entity. Doubting the credentials of Indian Muslims has become very old practice of the RSS, that is why it is known as an anti India org’n. Muslims do value their identity wherever they are, and it is their survival instinct, nothing more and nothing less. Muslims are extremely patriotic – they are being demonized in the country to serve some interests, thats all. In Kargill, many more Indian Muslim soldiers sacrificed their lives for their country, much more than their proportion in the army – that is enough proof of their patriotism and love of the country. Extremists may go on beating their drums against Indian Muslims and Islam; they may achieve their limited goals, but when it comes to fighting for the country, Indian Muslims are the first in the firing line to face the enemy. By the way, China is knocking on the door – and only a united India would be able to face that enemy.

    Anonymous Reply:

    You are wrong on the first sentence. The first person to see Hindus and Muslims as two separate nation was Syed Ahmed khan who established AMU.

    RSS/Mahasabha was a much later retaliatory movement.

    Till 1857, Hindus-Muslims faught together against Brits and Hindus being large hearted installed Bahaduyr Shah Zafar as King but muslims after 1858 decided to side with Brits under Syed Ahmed Khan.

    It was muslim league who picked up ideology of Syed Ahmed Khan and even before mahasabha was born the idea of pakistan was articulated by Mohammad Ali and then Iqbal.

    In 1946, 90% of muslims of undivide India voted for muslim league in support of pakistan.

    These are all historical facts. I am not saying that all muslims are responsible for partition. There were few greats like Ashfaque Ulla Khan but muslims marginalized such great patriots.

    Now muslims are trying to act clever and shifting the blame of partition on Hindus. The 33% of muslims killed 0.6 million hindus whereas 67% hindu-sikhs killed only 0.4 million muslims during partition.

    The reason why muslims don’t join armed forces in great numbers is that majority of them don’t want to fight fellow muslims i.e. pakistan.

    lastly you may be a patriot but majority in your community of opportunist patriots or downright traitors.

  • Anonymous

    Sunita,
    The ideological argument behind dividing big state is that smaller states are easy to govern but from political point of view, it means more CM, more ministers, more MLAs and more avenues for corruption.

    I agree with governing part but the real benefit of divisions will be reaped only by politicians.

    I am against this division business because it will open pandora box and we will see similar demands thruout India. This needs to be stopped else India will go back to 570 odd principalities…We don’t want pre-1947 India. Let us not destroy Sardar Patel’s India.

    Instead we should move towards keeping states intact but divide them into development zones with each zone getting proportional funds based on area and population and a Dy. CMs under CM to manage the zones. However the word of CM should be final on all issues.

    [Reply]

  • Ramesh Talwani

    SUNITA ,NEHRU AND MOHAN DAS GANDHI GOT INDIA DIVIDED MUCH FASTER THAN THIS. WHY DONOT YOU READ , last days of british raj and mission with mountbatten.
    IT WAS DONE BY DRAWING A LINE ON MAP.
    HOW MANY PEOPLE GANDHI AND NEHRU GOT KILLED IN PROCESS.PL RESPOND.

    [Reply]

    Saron Reply:

    Then there is all the more reason to learn from history – two wrongs can’t make one right

    [Reply]

  • http://www.desibits.com/ Avinash

    The question is not whether there was violation of any provisions of the Constitution but still there are certain ethics, and established practices to think, discuss and then come to some conclusions after having taking into confidence some eminent personalities or at least the political parties. The way or in a haphazard manner the Bill was approved in the UP assembly the intentions of Mayawati are clear. Her eyes are focused on the forthcoming elections in the State in early months. If the provisions of the constitution not abused but for sure have not been respected either in a democratic manner it should have been done. There are certain ethics, certain established precedents but in politics who cares????????.

    The need of the hour is to have a national debate on such issues and there should be certain amendments made in the Constitution ensuring that the politicians with malafide intentions does not succeed.

    [Reply]

  • Anonymous

    why is it that all HT writers/editors/journalists find everything wrong that non congress leaders does and right in whatever the most incompetent/corrupt and shameless party called congress does. 70 years of struggle makes division of UP/uttarakhand a good case ? Up being the most populous state still is most unmanageable state. It is still a candidate of further division. If it had come from Rahul Gandhi, every single writer of HT from Pankaj Vora to Vinod Sharma would be clapping and saying wah wah kya idea hai!!!

    [Reply]

    Kunal Reply:

    that’s cause HT is Congress propaganda newspaper. it is not impartial or objective…if you want to read good analysis read DNA or The Hindu. I come here to see the reaction in the commentary section.

    [Reply]

    Saron Reply:

    Sorry Rohit — there should be proper ground work and homework before taking such major decisions. They are not done in a huff. Its not a question of non congress governments doing — but the haste in which it has been done

    [Reply]

  • Anonymous

    Coming on the eve of elections to the state assembly, Mayawati has played her trump card of dividing the state into 4 parts in the hope that the people will forget all about her misgovernance of 5 years and accept the argument that UP has remained backward just because of its unmanageable size and Centre’s step-motherly treatment and that smaller manageable states will bring them more central funds and freedom from manipulations of leaders of richer regions or whatever.. It is a pity that the present day political leaders cover their governance sins by diverting people’s attention to issues that will further exacerbate their misery. It is a pure and simple election stunt. Hopefully,the people will see through her loaded game and vote for the candidates who are capable of pulling the state out of the economic and political morass it has fallen into because of the questionable activities of its socalled democratic rulers. How does she justify erecting her statues and amassing wealth disproportionate to the known sources of her income and reluctance to explain how the central funds were used..

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  • http://digitalblogindia.in/ Kunal

    The other smaller states like Jharkhand, Chattisgarh and Uttarakhand are not really doing that great even after separation. What makes one think that UP will do well after dividing into 4 smaller states ? It will just hog more money from the centre when that money could have been used elsewhere. It’s time the Gadgil formula be changed so that bigger states like Maharashtra gets it’s due share from the centre.

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  • Anonymous

    Read history first..It is not communalism but bare facts that you want to hide under the patronage of pro-muslim Congress.

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  • Anonymous

    Rana,
    But the fact remains muslims divided India. In west pakistan hindus-sikhs were reduced to 1% from 22%. In East paksitan i.e. BD, hindus were reduced to 8% from 28%.

    Pakistan was meant for south asian muslims but now India has as many muslims as pakistan. However muslims still claim that hindus are communal and muslims are victim.

    Ulta chor kotwal ko daantein.

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  • Anonymous

    nice article, i just finished bookmarking it for future reference. i would love to read on future posts. how do i configure the rss again? thanks!

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