Car makers feel excise duty cut may pep up sales

Consumers have begun coming back to car showrooms following the recent cut in interest rates, say top industry officials. A sustained reduction in excise duties since 2003 led to a 20 to 24% drop in car prices fuelling growth in the passenger car market. A reduction in excise duty to 24% in 2003 to 2004 led to a 27% growth in car volumes to 9 lakh units. However, growth during 2005 to 2007 fell in spite of a 10% GDP growth rate. Analysts said there was no excise duty reduction during those years indicating a direct co-relation between the fiscal measures and car sales. In 2007 to 2008, a reduction in excise duty to 16% fuelled a 12% growth in car sales to 15.5 lakh units and sales in 2008 2009 was flat at 15.5 lakh units. New launches in the mass segment and focus on rural markets are expected to drive growth for car companies, currently grappling with single digit growth rates. Maruti Suzuki, Hyundai, General Motors, Honda and Toyota have managed to record steady sales growth, thanks to new launches. Besides, auto makers are also tying with finance companies to offer attractive EMI (equal monthly installments) packages. (July 4, 2009)