Mahindra Planning to Modify its SUVs

India's leading SUV maker, Mahindra & Mahindra which faced a low demand in its sales in April 2013 due to higher excise duty imposed on SUV models, might now consider modifying its products to even up with the new specifications for lower duty, says company in a statement. Mahindra had previously expressed concerns that in the current economic environment, any additional duties levied by the Government will be counterproductive from a revenue generation viewpoint.

According to the Union Budget 2013-14, SUVs sporting 1500cc engine or above, a minimum 170mm ground clearance and lengt of 4 metres or more will now have to pay 30 per cent excise duty instead of earlier 27%. And that is why, sales of SUVs dropped 14% in April 2013. So, one thing that M&M will probably do is lower down the ground clearance of its vehicles.

Speaking on the same, Pawan Goenka, President, Automotive & Farm Equipment Sectors, Mahindra & Mahindra Ltd. said, “While the tax in itself is a concern, we are perplexed about the criterion and justification of this additional duty. The hike in excise has also resulted in a situation where there is no level playing field between players in the industry as some of the best selling SUV models competing in the same price bracket do not come under the increased duty structure due to the specifications in the new definition of SUVs.”

“If the increase in excise duty is to compensate for the diesel subsidies, why haven’t all diesel vehicles been included under the proposed increase? If it is for road congestion, why haven’t all large vehicles been subjected to the same tax hike? If this is a tax on the rich, why not tax all vehicles above a certain price point? ”, he further added.

Commenting on the impact of the higher excise, Dr. Goenka said, "The increase of 3% excise has resulted in the decline, instead of growth in a segment which was the fastest growing till recently. Clearly,this is a big dampener, and it has also affected the overall industry sales.”

He also talked about the rising diesel prices, and the difference between petrol and diesel coming closer every month. "In fact, the petrol-diesel price differential is currently 26% as compared to 42% a year ago.", so the rising diesel prices and raised excise duty is creating 'a double whammy'.

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