M&M may modify some SUVs to duck duty

After the Union Budget 2013-14, SUVs that have an engine of 1500cc or above, a minimum ground clearance of 170mm and a length of 4 metres or more attract 30 percent excise duty, instead of 27 percent earlier. This has apparently taken a toll on the sales of this class of SUVs and sources say sales have dropped by 14 percent in April 2013, as compared to April 2012. 

 

The easiest way for M&M to duck the additional duty would be to reduce the ground clearance on some of its SUVs. Most SUV owners here prefer to stay on tarmac with these vehicles anyway. 

 

“This trend is contrary to the 24 percent growth witnessed in April 2012. The increase of 3 percent 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,” said Pawan Goenka, president, automotive and farm equipment sectors, Mahindra & Mahindra. 

 

He added: “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.”