Your car will cost more! Here's why

am convinced the government is sadistic.

They dangle a carrot in front of you and make you drool. And, just when you are about to take the first juicy bite, they snatch it away.

Let me explain.

I want a car!

Badly. And, post-Budget, I could not wipe the grin off my face. I thought Finance Minister P Chidambaram was the best thing that happened to India.

Remember the 5% cut in customs duty of car components? As a result, the auto majors grudgingly agreed to lower the cost of their cars.

Automakers like General Motors, Hyundai and Honda-Siel would lower costs by Rs 2,500 to Rs 15,000.

After all, most of them have substantial imported content that goes into their engines' vroom quotient.

Wasn't that great? I could not wait to get my set of wheels.

Alas! My euphoria was shortlived and my admiration for the finance minister came to an abrupt end.

Here comes the killjoy.

Now, I read media reports telling me the government has cruelly decided to raise the excise duty on steel from 12% to 16%.

In case you are wondering why that has me in a tizzy, let me elucidate.  

As you are aware, the excise duty is a tax levied on goods manufactured in India and is paid by the manufacturer. To offset the hike in excise duty on steel, automobiles manufacturers will engage in the classic strategy of passing the buck to us -- the consumers.

And since steel is the most important input in manufacturing a car, the buck will add up to quite a tidy sum.

That means two words I dread most: price hike.

In their efforts to increase their market share, car manufacturers had engaged in cut-throat competition earlier (those were the days!).

They absorbed the previous increase in steel prices to expand their market share. Their profits were hit, but their market share increased.

Better sense seems to have prevailed in Motown now. Let the consumers pay seems to be the latest mantra.

One after the other, they disappoint

Like always, the trendsetter is once again our own, home-bred Maruti Udyog Limited.

True to its character, the company spokesperson has kept the amount and timing of the hike behind closed curtains.

All we got to know was that the price hike will be unveiled only after gauging competitors' response (I actually thought of an indefinite fast!) and public demand.

Hyundai Motors India Limited, which is a runner-up to MUL, has overtaken it this time. The HMIL spokesperson said the price of its numero uno model Santro would be hiked in the first week of April. But then, all policies of any budget become effective only in the first week of April, when a new financial year begins!

That brings us to General Motors, which manufactures the Chevrolet Optra and Chevrolet Tavera (a Sports Utility Vehicle). They too will follow suit.

My dear MBA seniors who are fast approaching their (very) late twenties and are eager for all the status symbols that money can buy will surely be disappointed!

According to the company spokesperson, besides the increase in excise duty of steel, there is an additional reason for the price hike.

If Europe can have its Euro II compliant cars, we in India can't be left behind. The desi counterpart of Euro II compliance is Bharat III. Both versions force auto companies to produce engines that are less polluting.

Actually, I can't blame them for protecting and conserving our environment!

Butl, to get back to the point, GM India also wants to pass on the cost of making their vehicles Bharat III compliant to the consumer.

While the cost of the Chevrolet Tavera will likely increase by 3%, the other two models, the Chevrolet Optra and Opel Corsa, will be hiked by 1 to 2%.

The same holds true for Ford India, which follows in the footsteps of GM.

They too plan to increase prices to offset the rising cost of steel inputs and implementation of Bharat III.

All hope lost?

With a sigh of dismay, I realised the government gives with one hand and takes with the other.

As I get ready to fasten my seat belt, I must simultaneously loosen my purse strings.

But hey! Being the eternal optimist, I discovered a silver lining to the dark cloud of hike in car prices.

I heard the Insurance Regulatory and Development Authority, the watchdog agency that regulates insurance industry in India, plans to put a de-tariffing structure in place. This means it could make auto insurance a lot cheaper than what it is today.

The catch is, car owners with a good driving track record and good maintenance habits will benefit more from this proposal. If you (the owner of the car) take the wheels in your hand, instead of hiring a driver, you will be the biggest beneficiary.

You will be bundled in the high-risk category, if you and your driver take turns to steer the wheel. The higher the risk category, the higher the insurance charge you will have to pay.

I'm not worried about that, though -- I was not thinking of hiring a driver anyway!