The cost of Telco's best selling multi-utility vehicle, Sumo, is expected to go up by around Rs 15,000-Rs 17,000 with the cost to the customer going up by almost Rs 20,000 per vehicle on account of a cascading effect of the 5 per cent increase in duty announced by the union budget yesterday.
"If one is to classify the latest from the Telco stable, the Safari, as a multi-utility vehicle, the cost to customer could go up by over a lakh on account the change in the duty structure," industry sources pointed out.
It may be mentioned that Telco has classified the Safari as a sports utility vehicle, though the duty structure has not taken into account any such category.
"The increase in the duty will affect Telco sales more than that of other vehicle manufacturers as the former's vehicles are in the high cost band. Hence, the cost of Telco vehicles will go up more than that of its competitors."
The budget has also imposed a 10 per cent hike in duty for multi axle vehicles which is going to affect the HCVs prices of Telco and Ashok Leyland products, industry sources pointed out.
However, the impact is expected to be more on Ashok Leyland. "Two years ago, the multi axle Telco HCVs (2213s) were selling at a premium of a lakh per unit. However, on account of the sluggishness in the markets, the sales of the 2213s has dropped," the sources said.
As a result of the sluggish market, Telco's LCVs have been selling better, and hence the hike in the 2213 prices will not affect the company as much as Ashok Leyland, a large chunk of whose sales come from its multi axle heavy commercial vehicles.
Interestingly, the 10 per cent hike in duty of the multi axle vehicles is expected to impact the sales of new entrants like the multinational truck major, Volvo, which only manufactures multi axle products.
The long term affect of the budget, however, is expected to help utility vehicles manufacturers like Telco as the budget has given a boost to the development of infrastructure like roads, power and communication.
The boost in infrastructure will have a cascading effect and boost the sales of both light commercial vehicles and heavy commercial vehicles.
The dropping of the 5 per cent service charge on the transporters segment is also expected to boost sentiments which will help boost sales of utility vehicles. The 5 per cent increase in cold rolled sheets will affect the input costs of Telco as the company uses the sheets for body building of its vehicles.
