The sub-four metre passenger vehicle segment in India is a hugely popular one and a significant volume-driver for the automobile industry, thanks to the excise duty benefits offered by the government for such vehicles.
However, the wide range of compact sedans and SUVs in India which are engineered to barely duck the four-metre mark might graduate to around 4.3 metres following the implementation of the goods and services tax, according to Pawan Goenka, executive director, Mahindra & Mahindra.
“If you look at the dimensions of cars in the market right now, you will find one bunch each of around 3.6 metres, 3.9-metres, and 4.2- or 4.3-metres. You will never find a vehicle around 4.1-metre in length. With the GST, cars measuring around 3,995mm may move up to 4.2 or 4.3 since that is a comfortable size to design a car,” Goenka told Autocar India.
“If the sub-four metre concession goes away, then the number of cars over four metres may be somewhat larger because the duty benefit does put a constraint on the right kind of space, design, styling,” he admitted.
The implementation of the goods and service tax is likely to result in a shift in price structures. With a standard tax rate for both, the compact sedans and hatchbacks, and mid-sized and full-sized sedans, the price gap is expected to shrink.
Goenka welcomed the government’s decision to initiate the process of rolling out the bill but said it will be crucial to see the final rate and tax treatment to various segments within the automotive industry.
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