Business

GST Impact: Cars Likely To Get Cheaper As Prices Drop Upto Rs 5 Lakh

Originally Published On BW Businessworld |

With the GST in place, cars are likely to get cheaper, some even up to Rs 5 lakh Avishek Banerjee reports for BW

Close on the heels of Prime Minister Narendra Modi making an official announcement on Goods and Services Tax (GST), automakers from various verticals and segments are going full wing to revise prices across their entire lineup in order to pass on the benefits to the consumers. Most of the automakers BW Businessworld spoke to over the last couple of days have confirmed that the prices of cars, motorcycles & scooters will come down from 1st July as the GST comes into force. However, bigger bikes (by Harley, Triumph, Ducati, Royal Enfield) with engines above 350cc will become dearer by Rs. 30,000-50,000. Sports Utility Vehicles, which account for 20% of the overall PV market, will be witnessing a massive drop in prices as taxes levied on them have come down from 55.3% to 43%.

Vishnu Mathur, DG, SIAM told BW Businessworld, “We have always welcomed the GST which has some of the major benefits like one uniform tax without frequent changes. There might be some teething trouble for the first few months, but things will normalize in the medium to long term. While there may be no major price revisions for small cars, there will be a huge mark-down in the prices of SUVs, premium sedans and luxury cars. Hybrid vehicles will be the worst affected because of the imposition in additional taxes.”

The downward revision in car prices ranges from Rs. 2,300 for Maruti Alto to over Rs 5 lakh for luxury vehicles. While companies like Maruti, Jaguar, Toyota, BMW, etc., have already chopped off the price tag, others like Hyundai, Honda, M&M, etc., are waiting in the wings.

Maruti Suzuki India Limited, the market leader in the passenger vehicle market, has announced that with effect from 1st July, 2017 its models will drop by upto 3%.  It has cut the price of Alto in the range of Rs 2,300-5,400, WagonR Rs. 5,300-Rs 8,300 and that of Swift Rs. 6,700-10,700. It has also reduced the price of Baleno in the range of Rs. 6,600 and Rs. 13,100. The company has also reduced the price of Dzire, ranging between Rs 8,100 and Rs 15,100.  The Price of Ertiga petrol has been cut by up to Rs 21,800 while that of petrol powered Ciaz by up to Rs 23,400. The company has reduced price of compact SUV Vitara Brezza ranging between Rs 10,400 and Rs 14,700, while that of S-cross has been cut in the range of Rs 17,700 and Rs 21,300. However, owing to withdrawal of tax concessions on mild hybrid vehicles, the price of Smart Hybrid Ciaz Diesel and Smart Hybrid Ertiga Diesel has increased.

Toyota Kirloskar Motors (TKM) stated that while its Fortuner SUV’s prices will come down by upto Rs 2.17 lakh, Innova MPV’s prices will be dropped by upto Rs. 98,500. It will also reduce the prices of Etios by upto 24,500, Liva by upto Rs. 10,500 and Corolla Altis by upto Rs. 96,000 (P) and Rs. 45,000 (D). The company, however, has hiked the prices of hybrid variants Toyota Camry and Toyota Prius by over Rs. 3.5 lakh in Bengaluru and up to Rs 5.24 lakhs in Delhi as per applicable tax under GST. The price change will vary from state to state, model to model and variant by variant depending on tax rates applicable prior to GST.

"From 1st July onwards, we have passed on benefits to the consumers. But unfortunately, we are compelled to jack up Camry hybrid’s prices, N. Raja, TKM, Director & SVP, Sales & Marketing told BW Businessworld.

India Yamaha Motor Pvt. Ltd has already announced its post-GST (Goods and Services Tax) prices which will be applicable for all of its products from today

Commenting on the new prices, Mr. Roy Kurian, Senior Vice President, Sales & Marketing, Yamaha Motor India Sales Pvt. Ltd. said, “It is quite likely that in the long run, the GST will accelerate market demand as growth rate is expected to be around 10% after the implementation.”

The biggest beneficiary of the new taxation structure are luxury carmakers as companies like Mercedes-Benz, BMW, Audi and Jaguar Land Rover have announced price cuts in the range of Rs. 1.25 lakh going up to Rs. 7 lakh. For instance, the price revision (in INR) for Merc models is as follows: CLA: earlier 32 lakhs now 30.8 lakhs. New E-Class: earlier 55.7-69 lakhs now 53.7-67 lakhs. GLS 350: earlier 83 lakhs now 80 lakhs. Mercedes-Maybach S 500: earlier 1.87 cr now 1.80 cr.

Roland Folger, MD and CEO, Mercedes Benz India stated, “There may be initial teething issues but we are confident that there will be promising long term gains.”

Tata Motors-owned Jaguar Land Rover has also announced the new prices under the GST regime for its entire product range in India. These prices will be effective from 1st July 2017. German luxury car maker BMW has also cut prices of its models, ranging from Rs. 70,000 on base version of X1 to Rs. 1.8 lakh on the top-end variant of its sedan 7 Series. However, the company's hybrid model i8 will witness a hike of Rs. 4.8 lakh and will now cost Rs 2.28 crore.

Rohit Suri, President and Managing Director, Jaguar Land Rover India, was quoted as saying to a news agency, “On an average, on the basis of ex-showroom Delhi prices, the reduction in the prices of our vehicles across the range will be around 7%.”

Gautam Khattar Partner Indirect Tax PwC stated, “Overall a positive for auto industry, exception being bikes over 350 cc which have  negatively impacted. The local state VAT which leads to variations in prices across state will no longer be there and may provide a single price across India. However, the existing leases will be impacted upto 30 percent. New lease will reap the benefit of additional credit available under GST.”