Latest Car News in India

Monday, July 11, 2011

By Pranjal Gera

Volkswagen jitters over new VAT regime

The new policy of the Government Maharashtra on Value Added Tax (VAT) applicable on automobile industry has created a ruffle amongst the auto makers who see the notification which has deferred the returns on investment as a step backward.

The government of Maharashtra which has offered many a tax soaps to automakers to invest in the state find this change as a reversal to the earlier policy and this could affect further investments specially the current expansion plans of companies like Volkswagen.

Speaking on the occasion of the rollout of the 1,00,000th car from its plant in Chakan near Pune on the Friday 8th July, John Chacko Managing Director, and Volkswagen India showed concern while speaking to the press. He was however optimistic about the discussions the automobile industry has had with the Government and felt that the issue will be resolved within the next fortnight.

The new regulation has affected the automobile industry to the extent that the sales have declined to 15-20 percent in the last quarter.

Volkswagen who have had a fantastic debut in India is however upbeat about its future here. The growth has been phenomenal with 166 percent growth in sales registered in June with 5,397 units as against 2,032 in the same month in 2010.

Last year Volkswagen had sold 32,500 cars in India, which is an achievement in itself, but in 2011 it has already sold 39,366 cars in the first 6 months.

The automobile industry in India is expected to slow down by 12-14 percent as compared to the 30 percent growth it registered last year, but Volkswagen is expanding its facility at Chakan near Pune which rolls out Volkswagen Polo, Volkswagen Vento and also Skoda Fabia, to narrow the gap between the demand and supply. This would reduce the waiting period for Polo and Vento which is anywhere between 2 to 3 weeks for the petrol version and 6-8 weeks for the diesel.

Other players in the market who have invested near Pune include Mahindra and Mahindra and General Motors who too have ambitious plans and have already invested to the tune of Rs 15,000 crores.

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