Auto dealers seek excise cut on lying stock

Auto dealers seek excise cut on lying stock

New Delhi: Auto dealers have demanded that the benefit of the Central excise duty cut announced by the government on 7 December should be extended to stocks lying with the dealers on that day.

“The automobile retail trade collectively may have to take a hit of Rs500-600 crore in clearing the existing stocks at the revised prices announced by the manufacturers," the Federation of Automobile Dealers Association, or Fada, has said in letters addressed to various government departments, including the finance ministry.

The government had on 7 December cut the so-called Central value-added tax, or Cenvat, by 4% for all classes of vehicles in a bid to lift consumer demand and counter slowing economic growth.

While the cut is applicable for cars, trucks and two-wheelers produced after that date, manufacturers, as is usually the case in such situations, made the lower prices available to customers immediately.

For instance, Maruti Suzuki India Ltd reduced the price of the Alto by Rs8,028 to Rs2,66,724 for the Lxi version from midnight of 7 December. Hero Honda Ltd, the country’s largest two-wheeler maker cut prices by Rs1,000-2,000.

Meanwhile, dealers saddled with high inventories due to slowing sales in the past three months had to take a hit as their stocks had been added at the previously higher excise rates.

While in the past companies have compensated dealers for losses suffered as a result of excise duty cuts, this time they haven’t been as forthcoming as they have had to contend with slowing sales and increasing pressure on margins due to plant shutdowns.

Some dealers say that they’re being compensated by companies.

Pradeep Kumar of Deep Hyundai, a Delhi-based dealership for Hyundai Motor India Ltd, said the company is compensating dealers as long as they meet 80% of their targets for December. In the past, companies would compensate dealers without linking any targets, he said.

Dealers are under pressure as “even after the excise duty cuts sales have still to pick up," said Gulshan Ahuja, secretary general of Fada.