Vote on Account 2014: Maruti, Hyundai, Nissan, Hero to benefit from excise duty cut
The beneficiary of excise duty cut on small car would be Maruti Suzuki, where small cars constitutes nearly 65% of total volume.
Finance minister announced excise duty cut across the vehicle segment to provided much needed tax stimulus to arrest the sapping demand. The excise duty on small car/two-wheeler/commercial vehicles has reduced to 8% from 12%, from medium/large cars excise duty now reduced to 20% from 24% and SUV excise duty lowered to 24% from 30%.
The excise duty cut would likely to cut two-wheeler price by about Rs 1200-1500 per unit and small car price likely to cut by around Rs 15000-16000 per unit. SUV price would be cut by around Rs 50000-80000 per unit if excise duty passed on consumer entirely.
The beneficiary of excise duty cut on small car would be Maruti Suzuki, where small cars constitutes nearly 65% of total volume. The quantum of excise duty would be determined on the basis of how much companies pass on the consumer. Maruti Suzuki is currently offering average cash discount of Rs 18000 per unit, so reduction in the average cash discount would be positive for margin improvement. Maruti would be rolling out newly launched Celerio, so price reduction on back of excise duty will make product more luring for small car segment.
On the medium car segment main beneficiary would be Hyundai, Nissan, which constitute 36% of sales in 4250-4500mn size. On the two-wheeler segment real benefit of excise duty will percolate to the Hero MotoCorp. Hero Moto is having highest domestic exposure.
The excise duty cut on the Commercial vehicles is unlikely to change the demand dynamics of the sector, given the cash discount currently ranging between Rs 175000-180000 per unit, but volume growth still on the downward slope.
"The demand of commercial vehicle is unlikely to get impetus from excise duty cut as macro environment is quite uncertain and hazy. The tax cut will not change anything for demand side factor, so CV sector impact would be quite minimal", said Basudep Banerjee of Quant Broking.
Coming as huge respite for M&M, UV excise duty will be help to arrest the falling the sales volume .Though UV1 segment has been grown on ramp up of sales volume of Ford Ecosport and Renault Duster, but UV2 segment sales volume dropped to 1.77lkh units in nine month of FY14 compared to 2.14 lkh units a year before in same period. The volume growth estimate of M&M likely to revised upwards for FY15 on excise duty cut.