Heralding the government's package to stimulate the economy, major auto companies, including the market leader Maruti Suzuki, on Sunday announced to cut prices of its vehicles by up to 4 per cent.
The governments stimulus package, which announced a 4 per cent reduction in Cenvat is likely to give a shot in arm to struggling auto sector, which has seen a slump in demand.
All major auto makers are expected to pass on the benefit of the duty cut to the consumers who can expect at least 4 per cent cut in automobile prices from mid-night on Sunday.
Major Auto maker Maruti SuzukiChairman R C Bhargava said: "A 4 per cent reduction in Cenvat means every product will come down by 4 cent. . . as per my understanding all car prices are likely to come down by 4 cent."
Mahindra and Mahindra President (automotive sector) Pawan Goenka said, "We will absolutely pass on the benefit from the excise duty (Cenvat) cut with immediate effect. This will certainly help in increasing the demand although we are not clear whether the cut is applicable across-the-board as, at present, different vehicles have different excise duty."
However, he said, "We are a little disappointed that the stimulus package has not addressed the specific issue of availability of funds in auto sector. We expect that today's reduction in excise duty and RBI's move to increase liquidity will help in boosting demand."
Though Maruti is upbeat to pass on the whole benefit to its consumers, another auto manufacturer General Motors India said, it is yet to decide on the price reduction.
"We have not read the fine print. At the moment, we are not able to comment on passing on the benefits," GM India vice-president P Balendran said.
As an immediate measure to encourage additional spending, the government has announced an across-the-board cut of 4 per cent in the ad-valorem Cenvat rate, to be effected for the balance part of this fiscal year, on all products except petroleum and those whose current rate is less than 4 per cent.
The stimulus package has also allowed all state departments to take up replacement of the government vehicles within the allowed budget.
"We are not necessarily disappointed. As Commerce Minister Kamal Nath had announced. We believe this is the first of the several measures to be taken up by the government," SIAM DG Dilip Chenoy said.
He further said, asfar as the commercial-vehicle segment is concerned, the stimulus given to the infrastructure segment is a good move as it requires construction activity that will help the demand for these vehicles to pick up.
As far as the two-wheelers and passenger vehicles are concerned, a cut in excise duty may help in improving sales, Chenoy added.
He said, "RBI has already taken the step on Saturday and we need banks to lend to the sector, which is not happening at this moment."