In what comes as a relief to the automobile industry and car buyers, Union finance minister Arun Jaitley has announced today that the excise duty reduction by the previous UPA government has been extended till December 31, 2014.

The industry was desperately looking for this decision. Automakers were a worried lot given that the reduced excise duty on vehicles in the interim Budget, presented on February 17 this year, was valid only till June 30. The excise duty on small cars, motorcycles, scooters and commercial vehicles had been cut to eight percent from 12 percent, while that on SUVs was reduced to 24 percent from the earlier 30 percent. On large cars, it was reduced to 24 percent from 27 percent, and to 20 percent from 24 percent on midsized cars. The duty on auto components had been cut to 10 percent.

Carmakers have long been demanding a cut in excise duty to reduce input costs and also to bolster demand. The month of May 2014 saw a small upward swing in car sales. But, with an expected excise hike looming again, carmakers had planned for a price hike, which would have adversely affected the entire auto market.

With no change being made immediately, it is expected that car prices will not be hiked, and the slight spur in car demand will continue. Ache din ahead for the auto industry at least!