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|March 01, 2001||Feedback|
Sector Focus: Automobiles
Passenger cars and utility vehicles: State of the industry (2000-01)
Cars, UVs and two wheelers: Tariffs
1 Excluding driver
Source: CRIS INFAC
Two wheelers: State of the industry (2000-01)
Passenger cars, Utility vehicles and Two-wheelers: Budget impact
n.a.: not available.
Figures in brackets indicate the closing share prices, on February 27, 2001 and February 28, 2001, respectively.
Pos= positive Neg= negative Neut= neutral
Source: CRIS INFAC
A: The reduction in the excise duty on cars is expected to have a positive impact on producers. Demand for cars is likely to increase significantly, since the reduction in the excise duty is expected to be passed on to customers, given the decline in sales during the period April-December 2000.
B: Although passenger cars and utility vehicles imports are expected to be brought under the OGL from April 2001, under the WTO agreement, the customs duty of 40.4 per cent is not expected to result in significant imports. This is due to the effective rate of duty for import of new vehicles, which is around 85 per cent for cars and around 63 per cent for utility vehicles. The effective rate of duty for used vehicles is around 181 per cent for cars and 147 per cent for utility vehicles.
C: The reduction in the excise duty on two wheelers (above 75 cc engine capacity) is expected to have a positive impact on scooter and motorcycle producers. However, Majestic Auto would not be impacted, since it is has a large presence in the below 75 cc segment.
D: Given that two wheeler imports are expected to be brought under the OGL from April 2001, under the WTO agreement, the customs duty of 40.4 per cent on import of new two wheelers could have a marginally negative impact on producers. The total effective rate of duty for second-hand two wheelers is around 147 per cent.
E: Reduction in the customs duty on steel items and other raw materials, due to removal of surcharge, is expected to have a marginally positive impact on cars and utility vehicle producers. On an average, steel items account for 10 to 15 per cent of the cost of raw materials. Imports account for around 25-35 per cent of the total expenditure on raw materials.
F: The reduction of surcharge on corporate tax, from 13 per cent to 2 per cent and the expected decline in interest rates, is expected to have a positive impact on producers.
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