Cars, trucks and two-wheelers are set to become cheaper following the four percentage point cut in Cenvat announced by the Government on Sunday.

Leading auto makers such as Tata Motors, Maruti, Hyundai and Mahindra said that they would pass on the benefit of the cut in the tax.

However, they are worried about the existing inventories, which have forced some of them to cut back production.

Mr R.C. Bhargava, Chairman, Maruti Suzuki, went on record, saying that the company hopes to effect a four per cent cut in car prices.

“This is a good measure which would enable us to realign the prices of our products. This is a step in the right direction. We will be happy to pass it on to the customers,” Mr Rajesh Jejurikar, Chief of Operations, Mahindra & Mahindra, told Business Line.

However, a section of the industry, wants more clarity on the measures and its implications before going in for a price cut.

Mr Arvind Saxena, Senior Vice-President, Marketing and Sales, Hyundai Motors India, said “We still need some time. We will definitely effect the change. But we have to study the latest Government measures in detail”.

Mr P. Balendran, Director, Corporate Affairs, General Motors India, said that the specifics of the Cenvat reduction are not clear. “We are not sure if this will translate into price cut for vehicles. One has to wait and see,” he said.

Inventory woes

For automobile manufacturers across the spectrum, an area of concern is the building up of inventories.

“The latest fiscal measures do not address the question of existing inventory. You can’t reduce the price for inventories. For the last couple of months, car manufacturers have developed too much inventory,” Mr Dilip Chenoy, Director-General, Society of Indian Automobile Manufacturers (SIAM), told Business Line.

“Typically we will not be covering stocks at the dealer level. What to do with the inventories, we will decide in a day or two,” said Mr Jejurikar.

“We definitely expect to cut prices. The details will be worked out on Monday,” said Mr H.S. Goindi, Senior Vice-President, TVS Motor Company.

source: Businessline