Automakers Lower India Sales Forecast on Government Levies

  • Government levies include luxury and infrastructure taxes
  • Car deliveries in February decline for second straight month

India’s automakers cut their forecast for annual sales in the next fiscal year after the government imposed levies on passenger vehicles in its budget.

Deliveries may gain as much as 11 percent for the year starting in April, Sugato Sen, deputy director general of the Society of Indian Automobile Manufacturers said Thursday in New Delhi. The group, whose members include Maruti Suzuki India Ltd. and Hyundai Motor Co., forecast as much as 12 percent growth last month.

While sales are still expected to expand at the fastest pace in six years if the annual monsoon season boosts farmers’ incomes, the new levies may crimp demand, Sen said. The government will levy a 1 percent luxury tax on passenger vehicles that cost more than 1 million rupees ($14,900) and an infrastructure tax that varies by engine capacity.

The auto group said last month that consumers in rural India, who buy about 35 percent of the cars, sport utility vehicles and vans sold in the country, will increase purchases as long as the monsoon lifts incomes. More than half of farmlands in India depend on rain-fed irrigation.

The group’s forecast change follows the second consecutive monthly sales decline for passenger cars. Deliveries of cars, excluding sport utility vehicles and vans, fell 4.2 percent to 164,469 units in February, the group said. The sales drop in January was the first in 15 months.

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