The Indian government is bizarre. A few months back, a new tax was applied on SUVs, resulting in 3% extra excise duty on them. The government justified the move saying that SUVs occupy more space on the road, although the truth is that large sedans occupy more space than SUVs. A criteria was set and if a vehicle fits into all three, then it is classified as an SUV. Thus an SUV is a vehicle which is more than 4-metres in length, having an engine larger than 1.5-litres and a ground clearance of more than 170 mm. Indian roads are pathetic and you really need good ground clearance to prevent scraping the underbody on large and unmarked speed-breakers.
Mahindra’s flagship vehicle, the XUV500 (we had a look at it earlier HERE )saw an immediate price increase due to the SUV tax. Sales started to fall because of the increased prices (also because of increase in competition). Now Mahindra is mainly a utility vehicle manufacturer and almost all its vehicles were affected by the SUV tax. In order to evade the SUV tax on the XUV500, the company made a very minor change.
Mahindra went ahead and added a stone guard which became the lowest point of the vehicle, resulting in a reduced ground clearance of 160 mm (from 200 mm). The XUV500 is no longer classified as an SUV and the company has reduced prices by up to Rs. 33,000/- ($550). Smart move by employing a very cost-effective solution. Now buyers can get rid of the stone guard if they wish to, as the vehicle won’t be taxed after sale.
Faisal Ali Khan is the editor of MotorBeam.com, a website covering the automobile industry of India.