Hyundai and Kia Current Event

Hyundai and Kia Current Event

(1) Summary of the article/news event

In the Wall street Journal was an article called “Car makers in India begin Raising prices” written by Nikhil Gulati was about Hyundai and the pressure car makers are facing in India. India’s auto makers on Friday began raising prices of cars and sport-utility vehicles to pass on an increase in the “factory gate” tax, a move that the industry expects will crimp demand for new vehicles in Asia’s third-largest automobile market. The finance Minister Pranab Mukherjee’s announcement to increase the base excise tax on most goods produced in India to 12% from 10%. This is part of his efforts aimed at “fiscal correction. The demand for new cars has dropped because of the costly loans and higher fuel costs. The local sales have dropped to a 3% growth from 30% last year.

“Interest rates continue to be high and demand is depressed. Raising prices in this situation will further hurt consumer confidence,” said Arvind Saxena, senior vice president of marketing and sales at Hyundai Motor India Ltd. The local unit of Hyundai Motor Co. is raising prices by about 8,000 rupees to 80,000 rupees, Mr. Saxena said. Mahindra & Mahindra Ltd. said it would raise prices of utility vehicles by between 3,000 rupees and 35,000 rupees. Local units of Ford and General Motors also said they would raise their rates but did not specify how much.

On a more positive note the India’s government decision not to levy an additional tax on diesel-run vehicles, a tax that was widely feared by the industry. These vehicles have been in demand as the lower cost of diesel and higher efficiency adds to their appeal. To keep inflation in check the government controls the price of diesel used by trains and trucks.

Finance Minister Mukherjee also raised the excise duty on large cars—with gasoline engines above 1.2 liters or diesel engines above 1.5 liters or with length exceeding four meters—to 24% from 22%. He abolished a flat tax of...