* Excise duty on SUVs falls to 24 pct from 30 pct
* Duty on small cars falls to 8 pct from 12 pct
(Adds details on cuts, executive and analyst comment)
MUMBAI Feb 17 Indian automotive shares gained
on Monday after the country's finance minister proposed cutting
the factory gate duty on vehicles, a move that could reduce
vehicle prices and boost sales.
Shares in Mahindra and Mahindra Ltd, India's
largest utility vehicle maker, rose as much as 1.8 percent,
while shares of Hero MotoCorp Ltd, the country's
largest two-wheeled vehicle maker, jumped as high as 4 percent.
Finance Minister P. Chidambaram, in his interim budget,
proposed reducing the excise duty on small cars, two-wheelers
and commercial vehicles to 8 percent from 12 percent.
The duty on sport-utility vehicles would fall to 24 percent
from 30 percent, while for large and medium-sized cars it would
drop to 24 percent and 20 percent, respectively.
Chidambaram presented the interim budget for the fiscal year
2014/15 to cover expenditures until a new government is formed
after elections due by May. His proposals are expected to be
approved by the parliament within the next few sessions.
"This has been an industry, which has been struggling, so
from that point of view it's a good signal and hopefully we will
get some bit of positive sentiment back," said VS Parthasarathy,
chief financial officer at Mahindra.
"This industry has been on negative growth trend for some
months, so hope that this helps it turn around the corner," he
Car sales fell 7.6 percent in January, the fourth
consecutive month of declines, according to figures released by
the Society of Indian Automobile Manufacturers (SIAM) as
consumers kept a tight lid on spending, hurt by high interest
rates and fuel costs in a slowing economy.
Utility vehicles were a bright spot in the auto market a
year ago, but an increase in factory gate duties and rising
prices of diesel, which is commonly used to power such vehicles,
has hit their sales as well.
"It may not be possible for automakers to immediately pass
on the concession to buyers, but given that vehicle sales have
been on a declining trend, I do expect automakers will do their
best to pass on some of the benefit," said Anil Sharma, an
analyst with IHS Automotive.
(Reporting by Aradhana Aravindan and Abhishek Vishnoi; Editing
by Matt Driskill)