Excise cut sparks small car boom in India

By Staff
|
Google Oneindia News

New Delhi, July 9 (UNI) An eight per cent cut in excise on small cars from 24 per cent, announced by Finance Minister P Chidambaram in March, has led to a blitz among car makers who are working overtime to reap maximum benefits out of the deal.

Major domestic as well as global auto players are riding on the clue given by the Indian government, initialising investment and expansion in the small-car segment.

Hyundai Motor India has drawn up plans to expand its compact car segment and will launch a mini-passenger vehicle by the end of 2007, primarily due to the major tax relief provided by the Centre on small cars.

''The excise cut of eight per cent is the major reason we are looking to increase our portfolio in the compact segment (below Rs 3.5 lakh). This will enable us to leverage the small car market which occupies 60-70 per cent of the total car market,'' Hyundai Motors Vice President Sales and Marketing Arvind Saxena told UNI.

The small car segment witnessed a growth of about five to six per cent till early this year. Analysts say the growth may hover around 10 per cent this year.

The tax cut has also prompted the Indian arm of US-based General Motors to quicken its foray into the mini-vehicle space with the announcement of the 'Spark' launch by 2007. The car will compete with Maruti's WagonR and Hyundai's Santro in the A+ segemnt.

Japan's Honda Motor company Ltd, in the meanwhile, has begun investigations for launching a new model in India, smaller than its City ZX, and is scouting locations to set up a manufacturing hub here.

''The small car from Honda, in the B+ (Swift and Getz) segment, is in the pipeline and will be hitting the Indian roads in the next three years. There is a lot of action as far as the location of the manufacturing unit is concerned,'' a company official said.

Among the Indian car makers eyeing the segment, are Tata Motors, who are exploring the low-segment, with it's ambitious Rs 1 lakh car project that will be rolled out in early 2008.

Tata Group Chiarman Ratan Tata yesterday indicated the possibilities of setting up manufacturing plants for the ''people's car'' in West Bengal, Uttaranchal and Punjab.

The unveiling of this car is touted to push up low-cost personal transport, and create a new market space for the low and middle class income groups.

However, most small cars that will see the light of the day in India soon, are planned primarily for the premium segment, thereby restricting the choices for the mass consumers in the low to mid segments.

UNI RA/CS PC/PV VA BD1210

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