Vehicle-makers, including carmakers such as Nissan, Hyundai, Mahindra and Mahindra (M&M) and Volkswagen (VW), have started passing on interim budget's excise duty cuts to consumers by slashing prices on Wednesday.
The price cuts are sparking hopes of a sales pick-up in the beleaguered industry, observers said.
M&M, for instance, has lowered the price of the Rexton, its premium SUV, by up to Rs 92,000. Pravin Shah, chief executive, automotive division, M&M, said, "We are confident the price cuts would provide the much-needed fillip to the auto industry."
M&M is set to reduce prices of its commercial vehicles (CVs) as well.
VW's Polo will cost Rs 18,000-Rs 31,000 less and the Vento by Rs 14,500-Rs 27,000. "We hope this move will help improve the market sentiment," said Arvind Saxena, MD of VW's passenger cars division.
But analysts think price cuts may not necessarily boost demand. According to India Ratings & Research, the upside from price cuts would be offset by reduced affordability, given the high cost of ownership and shrinking discretionary spending power.
Rising fuel prices and high interest rates continue to be the biggest hurdles to efforts to boost demand, experts said.