A 4% reduction in excise duty on small cars has augured well for the Nano, the Rs 1 lakh car of Tata Motors. Nano, (Images) expected to roll out from the Singur factory around September-October, will now have enough cushion to withstand a sudden spurt in input prices when it hits the Indian roads.

Nano has been priced at Rs 1 lakh after taking into consideration an excise duty of 16%. A 4% reduction will offer Tata Motors more headroom to hold on to the Rs 1 lakh price point in case of rise of inputs, like steel, aluminium and plastic parts.

However, Tata Motors company spokesperson said that it was too premature to comment whether Tata Motors will pass on the benefit of reduction in excise duty to buyers as it has done for other small cars in its stable. “This car is made to cost. The cost has been decided first and the design and engineering followed to fit to the price. Reduction in excise duty will enable the company to absorb price hikes of input materials and components through the margin that is now created as result of the reduction. Input costs for automobiles have in fact risen considerably in the past one year. For example, price of steel has risen by at least 15% over the last one year,” said an auto expert.

Interestingly, Tata Motors on Friday announced that it will reduce prices of its small cars and commercial vehicles, including buses, bus chassis and bus body, in view of the reduction of excise duties announced in the Union Budget.

This includes the Indica range of vehicles, except the Indica Zeta GLX and Indigo Compact sedan. According to the business roadmap prepared by the Tata Motors, the Singur plant will initially manufacture 2.5 lakh cars per year, which will be scaled up to 3.5 lakh units over a period of time. The company invested Rs 1,000 crore in the plant.

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