Maruti Suzuki, India’s top carmaker, will not be passing the benefits of lower taxes, at least for the new petrol variant of Swift — its most popular compact model — to customers. The company will save around Rs 40,000 per car thanks to a lower excise duty for the Swift’s smaller engine, but has blamed a cost spike for its decision, a departure from the past.
Maruti, which sells every second car in India, launched the 1.2-litre petrol Swift in January, but retained the Rs 4-lakh base price of its 1.3-litre model. The smaller engine attracts an 8% excise duty, 12% lower than that of the phased-out bigger version. Cars under 4 metres with 1.2-litre petrol engines and 1.5-litre diesel engines attract an 8% excise duty while other passenger vehicles are taxed at 20%.
Carmakers, including Maruti, typically pass the benefits of tax cuts to consumers by lowering prices. Maruti justified its move, saying it had to offset cost upswings in the Swift’s pricing. “For Swift, there is a cost increase owing to the new petrol engine. Add to it the increase in commodity prices,” the company spokesman said.
Society of Indian Automobile Manufacturers (SIAM), the apex body of Indian automakers that is a strong advocate of tax concessions, claiming they would translate into lower prices and benefit customers, refused to comment on the Maruti move. SIAM director-general Dilip Chenoy only said carmakers had always passed on the benefits of lower taxes. But industry experts, requesting anonymity, said Maruti has retained the price for its new model despite a smaller engine in view of increased competition expected in the premium compact car segment. A raft of small cars such as the Volkswagen Polo, Ford Figo and Toyota Etios will hit the market soon. “It will help Maruti face competition and leverage prices when new cars are launched in India,” said a former CEO of a domestic car major.
“Maruti could again offer discounts on Swift to undercut competitors, which may not be in a position to compete on prices.” Swift has been leading the premium hatchback pack ahead of Hyundai i20, Honda Jazz, Skoda Fabia and Fiat Punto since its launch in May 2005. It sells over 1 lakh units of petrol and diesel variants annually.
The new engine is likely to further consolidate Maruti’s position in the segment.
Maruti, which sells every second car in India, launched the 1.2-litre petrol Swift in January, but retained the Rs 4-lakh base price of its 1.3-litre model. The smaller engine attracts an 8% excise duty, 12% lower than that of the phased-out bigger version. Cars under 4 metres with 1.2-litre petrol engines and 1.5-litre diesel engines attract an 8% excise duty while other passenger vehicles are taxed at 20%.
Carmakers, including Maruti, typically pass the benefits of tax cuts to consumers by lowering prices. Maruti justified its move, saying it had to offset cost upswings in the Swift’s pricing. “For Swift, there is a cost increase owing to the new petrol engine. Add to it the increase in commodity prices,” the company spokesman said.
Society of Indian Automobile Manufacturers (SIAM), the apex body of Indian automakers that is a strong advocate of tax concessions, claiming they would translate into lower prices and benefit customers, refused to comment on the Maruti move. SIAM director-general Dilip Chenoy only said carmakers had always passed on the benefits of lower taxes. But industry experts, requesting anonymity, said Maruti has retained the price for its new model despite a smaller engine in view of increased competition expected in the premium compact car segment. A raft of small cars such as the Volkswagen Polo, Ford Figo and Toyota Etios will hit the market soon. “It will help Maruti face competition and leverage prices when new cars are launched in India,” said a former CEO of a domestic car major.
“Maruti could again offer discounts on Swift to undercut competitors, which may not be in a position to compete on prices.” Swift has been leading the premium hatchback pack ahead of Hyundai i20, Honda Jazz, Skoda Fabia and Fiat Punto since its launch in May 2005. It sells over 1 lakh units of petrol and diesel variants annually.
The new engine is likely to further consolidate Maruti’s position in the segment.
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