The Logan promised plenty when it was launched in India six years ago. Among the many reasons it lost out was the differential excise duty structure for cars.

In Budget 2006, the Government made known its intention to support the growth of compact cars. Excise duties were slashed to 16 per cent (from 24 per cent) for all models under four metres long and with engine capacities of up to 1.5 litres for diesel and 1.2 litres for petrol.

Being a larger car, the Logan qualified for the higher 24 per cent duty structure. And though it was the best bet for an entry-level sedan, it was still dearer than compact sedans like the Swift Dzire which took the market by storm.

There were, of course, other issues that derailed the Logan journey but it has been on a comeback trail since the time Mahindra & Mahindra took charge of its revival from joint venture partner, Renault. The rechristened Verito has been doing sales of around 1,500 units a month but the real fillip is expected with the launch of its sub-four metre sibling, Vibe, on Wednesday.

In the first place, the new entrant will be considerably cheaper, thanks to the lower excise duty of 12 per cent (twice as much for larger cars). Hence, where the Verito is priced at Rs 5.3-7.6 lakh, the two-box Vibe could end up being cheaper by around Rs 75,000. It is also part of a segment that accounts for a lion’s share of car sales in India characterised by models such as the Maruti Swift, Hyundai i20, Toyota Etios Liva and Ford Figo.

Game-changer

More than just the price, the Vibe could end up being a critical game-changer for M&M in the car space. The company first entered this segment in the mid-1990s with Ford before exiting to focus on its core business of SUVs. It then returned a decade later with Renault and now has the Verito in its kitty.

For a manufacturer that was not entirely certain of its brand strength at the time of launching the Scorpio in 2002, M&M has come a long way in the SUV space. It will hope that this association will rub off as successfully on Vibe customers as it has in the case of the Verito. The potentially large volumes here could perhaps offset any setback in sales of SUVs, thanks to the recently imposed higher excise levy in the Budget.

More importantly, the Vibe debuts barely a couple of months after the e20 electric car from the M&M portfolio. The company has reiterated that SUVs will continue to be its core activity. Yet, there is no getting away from the fact that competition is getting intense here with the entry of more players such as Renault and Ford. It is in this backdrop that the car business becomes critical as a vibrant alternative for the future.

murali.gopalan@thehindu.co.in

Related Topics