Amidst the industry slowdown, nine of Indian States recently saw a hike in road tax, further increasing prices of cars which will affect sales even more.
The Indian automotive industry for the last one year has been going through its worst slowdown in the last two decades. Rising prices, rising interest rates and low customer sentiments are some of the reasons to cite. And now, there’s another nail in the coffin as there has been a hike in road tax in nine states of India. These states include Punjab, Kerala, Jammu & Kashmir, Bihar, Uttarakhand and Maharashtra, among others.
With the hike in road tax, prices of cars will further go up in these states resulting in even lesser sales. On-road prices of cars could increase in the range of Rs. 5,000 to as much as Rs. 57,000 depending on the model and particular state it is being purchased in. For instance, the road tax in Jammu and Kashmir has been hiked by 9%, and this resulted in the on-road price of a Maruti Suzuki Alto 800 to go up by Rs. 22,900.
That’s quite a significant increment for a car that belongs to such a budget centric segment. Apart from that, prices of cars have also gone up due to the implementation of upgraded safety and emission norms and rising insurance expenses. All this has led to an increment in price of the Alto 800 by Rs. 63,000 over the past year. This has led to the Alto’s monthly sales in the state fall by 27%. For more expensive cars, like the Maruti Suzuki Ciaz, the price hike extends as high as Rs. 98,000.
Looking at some other states, small car sales in Punjab has dropped by 28%, 27% in Bihar and 26% in Uttarakhand. Another major reason for low customers sentiments over the past one has been rising interest rates on loans due to general economic slowdown. This has led to further decreasing purchasing power in the hands of the people.
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The transition to BS-VI emission norms have been another set back. Customers are divided in decision whether to buy a BS-IV vehicle now or BS-VI vehicle starting next year, of course at a much higher price. Many even do not know that buying a BS-IV vehicle now, they can run in the BS-VI era without any problem. This is leading to customers postponing their buying decisions. This has particularly affected diesel vehicles, leading to surplus inventory. Dealerships are offering massive discounts but customers are further delaying the purchase in the hope of more discounts.
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The government has announced certain measures to help the situation. The government has been particularly pushing the EV case in India but there does not seem to be any immediate respite to this situation. Car makers are banking on new launches and the festive season to some hike in sales. However, some major reforms and incentives are needed to bring the auto industry out of its slump.
