As the budget date draws close for the financial year 2011-12 there have been a lot of speculations as regards auto industry. Although the automobile industry witnessed an amazing growth of 30 per cent during the year 2010, there are worries that if the growth can be sustained and move forward more so because the macroeconomic environment is getting tougher and tougher.
Auto stocks at the national stock exchange have already been hit as the days are drawing close to the budget, for fears of excise duty on bikes and cars may be hiked. The government may announce a full withdrawal of stimulus package (the excise duty for cars and bikes cut under this) implying the excise duty will be on and up to 12 per cent. If that should be the case, the hike in excise duty will be passed on to end users by rising prices of the. However, it should be noted that it can affect the demand and the growth of the industry especially if you consider increase in the fuel prices and revisions in the recent times.
With auto companies struggling to make margins with increase in the price of raw materials any hike in the excise duty will prompt the auto makers to rise prices of cars and two wheelers and it may slow down the industry growth at least by some extent. And a slowdown when global companies are eyeing to invest and hire in India will naturally put them off too.