Indian car makers have received a big boost following the government’s decision not to hike taxes on diesel cars – a particular relief to domestic diesel-focused manufacturers such as Mahindra and Mahindra, and Tata.
Carmakers had feared a tax on diesel vehicles or a reduction in generous subsidies for the fuel, which has boosted sales as overall demand slows on high interest rates and rising petrol prices.
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The news also boosted shares in car companies in India on Friday (16 March) with Tata rising 2.6% to its highest ever prices while market leader Maruti Suzuki’s stock reached its highest level for a year, up 4.6%. M&M rose 6.1%.
The government also announced a rise in import duty to 75% from 60% for assembled SUVs and multi-utility cars costing more than US$40,000.
Diesel car sales have grown to account for about 40% of new purchases in India, compared with less than 20% a few years ago. Maruti Suzuki’s popular new Swift diesel has a waiting list longer than six months.
Cutting the subsidy, which makes diesel about 50% cheaper than petrol, is a political hot potato due to the fuel’s extensive use in India’s vast agricultural industry.
Analysts said that clarity in the government’s stance on the fuel should kick-start investment plans by India’s car makers.
