But aspiring buyers who missed the opportunity then said they have been forced to put their plan to climb up the economic ladder on hold now, as automobile distributors have jacked up automobiles prices by about 15 percent amid increase in excise duty that the government announced over a month ago.
Arun Intercontinental Traders (AIT) said Maruti 800, the largest selling car of starting category, is now priced Rs 1.03 million; Rs 900,000 previously. The price of Alto has also soared to Rs 1.34 million from Rs 1.19 million.
“The price of Zen and Swift, Maruti’s luxury car, too is now priced Rs 1.75 million and Rs 1.95 million respectively,” Raj Kumar Dhakal of AIT told Republica. A month ago, they were tagged Rs 1.6 million and Rs 1.8 million respectively.
The price of Hyundai Santro, another most driven car in the country, has also jumped to Rs 1.64 million from Rs 1.475 million.
“Even the price of i10, the newly launched and rapidly sold car, has increased to Rs 1.965 million from Rs 1.775 million,” said Yogen Sangraula, assistant manager of Avco International, Hyundai’s authorized distributor.
Sipradi, the distributor of Tata motors, said the prices of Tata Indica have increased by Rs 200,000 and Tata Sumo soared by Rs 336,000. The prices of larger vehicles including truck of over 10 ton capacity and bus accommodating more than 32 seats have also increased by more than Rs 100,000.
“Tata pick-up has also become expensive by Rs 200,000,” said Sambhu Dahal, vice president, Operations and Finance Controller of Sipradi.
The extent of rise is still higher in case of Toyota and Kia cars and sports utility vehicles.
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| Maruti Swift Now: Rs. 1.95 Million A Month Ago: Rs. 1.8 Million | Maruti 800 Now: Rs. 1.03 Million A Month Ago: Rs. 0.9 Million |
Anxious Market
The distributors said the decision of the government to raise the excise duty to 45 percent from 35 percent in case of smaller vehicles and 5 percent duty rise in case of larger vehicles has slowed the automobiles market.
“It has already hit the sales,” said Dahal.
Ninety percent of vehicles consumed in the country are backed up by bank finances. Traders said the rise in prices has clearly hit the people’s plan. Mainly those planning to buy car for the first time have been badly hurt.
Apart from the change in duty structure, the decision of the government to force the customers to disclose their source of income while spending Rs 1.5 million or more in vehicles has further turned the market anxious.
“The government is still to unveil modus operandi of implementing the income source disclosure policy. But that has already rattled buyers psychologically,” said Dahal.
That is not all. Present depreciation of Nepali currency vis-à-vis US dollar has further deepened uncertainty in the automobiles market. While it has increased the import rates, distributors said transfer of new rates to showroom prices could further drive buyers away.
“Rapid and sharp change in the value of currency has presently taken toll of imports confidence. Fewer letter of credits (LCs) are being opened at present,” said Rajesh Kaji Shrestha, importer of Jotsye brand of Chinese vehicles and a member of Nepal Automobiles Distributors Association (NADA).
Wrong Move!
NADA, meanwhile, has tagged the government’s decision to raise excise duty on vehicles, especially in the current transition period, as a wrong move.
The concern of NADA follows the latest trend in the market, whereby businessmen and relatively well off people are refraining from buying high-end vehicles and distributors are actually making business through push sales to the middle income group.
“So, how the middle income segment reacts to policy changes is very critical. And unfortunately, many have reacted negatively,” said Shrestha.
Automobiles and spare parts business is one of the leading revenue generating sectors. In 2007/08, Nepal had imported about Rs 12 billion worth of vehicles and spare parts from India alone. And the trade had contributed more than half of that amount in revenue.
“Further increase in duty on already high automobiles tax regime could hurt revenue collections,” said another distributor preferred not to be named.
NADA has demanded the government to review its decision. And it’s not just taxes. NADA has asked the government to lower vehicles registration fees as well, which has been doubled to Rs 15,000 in the current fiscal year.
New Strategies
Automobiles distributors themselves are not quite optimistic of government listening to NADA’s demands though. To fight off the possible slowdown at the distributor level, they are unveiling new schemes to counter the added cost of procurement to the customers.
Avco has increased the warranty period on Hyundai vehicles to 5 years from 3 years. “We are also providing car accessories worth some Rs 35,000 for free to the customers to compensate the added cost,” said Sangraula.
Others also said that they are providing free insurance coverage, which costs some 45,000 to the customers, in order to keep their sales intact. “Customers loyal to brand do not switch their choices with this price change. For others, we are working out different offers,” said Dahal.
Apart from internal workouts, distributors said that they are also hopeful of car’s factory rates to go down in the next few months, given the decline in prices of steel and other raw materials.
“Steel price has dipped by half in recent months in the international markets. We hope it will provide some relief to this anxious industry,” said traders.
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