Cars, SUVs and Luxury Vehicles to Get Costlier – Union Budget 2016

Chevrolet Trailblazer in India-10

Cars, SUVs and luxury vehicles to get costlier as the Union Budget 2016 imposed heavy taxes on the luxury as well as diesel cars costing above Rs. 10 lakh

The Financial Minister Arun Jaitley’s announcement in the Union Budget 2016 regarding the automotive industry has come as a hammer blow for the sales of passenger vehicles across all segments in the Indian market. As he intended the nine pillars of transformation for financial development in his budget speech which focussed on fostering the rural economy, the automobile sector was left stern faced with the taxes imposed.

The FM heralded that one per cent of infrastructure cess will be implied on all passenger vehicles running on internal combustion engines powered by petrol, CNG (Compressed Natural Gas) and LPG (Liquefied Petroleum Gas). Secondly, the cars equipped with diesel powerplants will have to bear 2.5 per cent tax regardless of the displacement capacities and the price range.


The booming luxury car space in the country will be affected by the one per cent additional tax on the premium and luxury sedans costing over 10 lakh rupees while the luxury SUVs will have to make do with the extra four per cent ‘high capacity’ tax enforced upon them. In an overview, it means to say that the buying of all cars, no matter which segment you’re choosing, has become expensive altogether.

Hyundai Creta Test Drive Review Road Test-26

The increment in taxes will inexcusably have a significant impact across the board from entry-level first-time buyers’ segment to the high-performance imports above the luxury segment. With the central government’s clampdown on diesel cars have become increasingly severe, the SUV manufacturers like Mahindra and Mahindra could be in for a tough tenure.

The above-10 lakh premium SUV market will have to bite the price hike as the diesel-engined models are set to become more expensive. Consequently, it may lead to decrease in Sports Utility Vehicles’ demand as well. However, the Financial Minister further stated that in a bit to improve roads and highways infrastructure, a sum of Rs. 97,000 crore has been allotted for the automobile industry.

This is aimed at improving rural commuting and could in turn intensify two-wheeler and LCV sales in the country. With several manufacturers hiking prices during the start of the year citing the increased manufacturing and operational costs, the Union Budget 2016 has indeed assured them of another strenuous financial year ahead.

Follow us on Facebook, Twitter & on Youtube