Delhi, the largest market for passenger cars, is expected to see a 10 per cent decline in sales from next month as a result of the steep increase in road tax announced by the city government on Monday.
In 2009, Delhi constituted 8.4 per cent of total passenger vehicle sales in the country, at 1,51,841 units (and a mere 2.7 per cent of total two-wheeler sales, at 2,37,540 units).
Assuming the average cost of a car is Rs 5 lakh, total sales revenue from passenger vehicles would come down to Rs 6,800 crore in Delhi in 2010, against Rs 7,500 crore in 2009. However, as the average road tax on these vehicles have gone up from three per cent to seven per cent, revenue to the state is estimated to be more than double, at Rs 476 crore vis-à-vis Rs 225 crore last year.
“Increase in road tax will bring down our sales in Delhi by 10 per cent, as the overall consumer sentiment has taken a hit,” said Mayank Pareek, executive officer (sales and marketing), Marurti Suzuki India. He said Delhi constituted eight-nine per cent of the company’s average monthly sales of 70,000 units.
According to the revised rates, cars up to Rs 6 lakh will attract four per cent road tax, cars between Rs 6 lakh and Rs 10 lakh will come with a road tax of seven per cent and cars above Rs 10 lakh will attract 10 per cent. This is much higher than the existing tax slabs of two per cent for private four-wheelers that cost up to Rs 4 lakh and four per cent for cars above Rs 4 lakh.
“This would be the fourth hike in car prices in as many months and will affect demand in the short term from a market like Delhi, where we sell 12-13 per cent of our total cars a month,” said Arvind Saxena, director (sales and marketing), Hyundai Motor India.
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According to Vaishali Jajoo, senior analyst, Angel Broking, “The latest increase in road tax will increase the ownership cost of the vehicle, as it comes along with a series of car price hikes earlier and an expected increase in fuel prices in the coming month.”
The new rates, effective June 1, will result in higher sales in neighbouring areas such as Uttar Pradesh and Gurgaon. “Some part of Delhi sales would move to adjoining states, as more and more people would want to save on the exorbitant hike of this kind,” added Pareek of Maruti.
In Haryana, the road tax is way lower. It’s a flat Rs 3,300 for cars costing up to Rs 4 lakh and Rs 1,300 plus one per cent of the car price for vehicles priced between Rs 4 lakh and Rs 10 lakh. For cars above Rs 10 lakh, the tax is Rs 1,300, plus 1.5 per cent of car price.