Car prices will rise a min of Rs 5,000 after Union Budget

Car prices are set to rise in India, now that the Union Budget has been declared. Finance Minister Pranab Mukherjee has proposed a 2 % hike in basic excise duty on all goods and commodities, from the present 10% to the proposed 12 %. Additionally, excise duty on large cars will also increase from 22% presently to 24%.

However, the government has decided against imposing a ‘diesel tax’, a move which has brought respite to car-makers in the country.

What the proposed hike means for the car buyer is that car prices are inevitably set to rise. Prices of small cars such as the Tata Nano and Maruti Alto will increase by Rs 5,000 approximately. The ultra-competitive supermini segmentwill also see a price rise of between Rs 8,000 – 12,000 for cars such as the Maruti Swift, Ford Figo and Hyundai i20. The sedan segment will witness a price hike nearly double that, while the luxury segment could see hikes of over a lakh of rupees. Car makers have indicated that they have no option but to pass on the price increase to customers, on what they claim are already tightly-squeezed margins.

There is some relief for car buyers though in terms of loans, with a proposed rate reduction of 0.5%, which has yet to be ratified. If the proposed reduction in rates comes through, the total effective price will remain more or less the same, which would be a relief to prospective customers and the auto companies.