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Excise duty may halt the war in SUV market

Just when the  price war was hotting up in the SUV segment, the government has thrown a spanner in the works.  Automakers Maruti Suzuki, Renault, Ford, and the Mahindras were locked in a fierce competition for the new space in the automobile segment, namely Sport Utility Vehicles (SUV).

SUVs were not selling well because of their expensive price tags. But Renault set the roads scorching when it introduced the Duster at an entry level price of Rs 7 lakh. SUVs never came that cheap before. Mark it, Voyager or Land Cruiser sell between Rs 40 lakh and Rs 50 Lakh.

Mahindra saw unprecedented success with its SUV 500, an aggressively styled vehicle. It was an instant sell out; its sales have been so good  that the model has a waiting period of three months for delivery.

But the government’s decision to increase the excise levy for cars with ground clearance above 150mm is going to increase prices by about Rs 30,000 to Rs 50,000 for each car as most SUVs have a ground clearance above this limit. The companies have decided to lower the ground clearance to 140mm to escape the enhanced excise duty and hold the price line.

Whether lowering the ground clearance for the SUVs will interfere with the safety standards of the vehicle is another question.

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