Honda City escapes tax hike by whisker

HONDA City has escaped, by the proverbial whisker, from the increase in central sales tax announced by the government on Friday. As a result the model appears to have gained vis- à- vis its arch rival Maruti Suzuki’s SX4.

Honda City has a1,497cc engine, which keeps the sedan out of the ambit of the central sales tax hike of Rs 15,000, which has been imposed on Maruti Suzuki’s SX4 and other mid- size competitors such as Hyundai’s Verna and Ford Fiesta as the engine capacities of these models are in excess of 1,500cc.

Maruti Suzuki, which is India’s largest car manufacturer, had deliberately priced its Sx4 model below the popular Honda City in order to eat into its market share and succeeded with its pricing policy. It had attracted buyers as SX4 was bigger and yet cheaper than Honda City. However, since it has an engine capacity of 1,586cc the price gap between the two cars has now been narrowed down by Rs 15,000. It now remains to be seen whether Maruti comes up with a discount offer to keep its edge on pricing.

The price of the low- end Honda City EXi is Rs 6,77,000 while the Honda City GXi model has been priced at Rs 7,31,000. In comparison, Maruti Suzuki’s SX4 VXI carried a price tag of Rs 6,38,000 while the higher- end SX4 ZXi was priced at Rs 7,09,000 until Friday.

The price difference between SX4 and Honda City on these two models worked out to Rs 39,000 and Rs 22,000, respectively. Consequent to the Rs 15,000 hike in central sales tax the price gap has been scaled down to Rs 24,000 and Rs 7,000, respectively.