The Indian government has just introduced an additional tax for cars, MPVs and SUVs with engine displacements from 1,500cc and above, a segment that sees nearly 400,000 vehicles sold annually.

Cars with engine displacements between 1,500cc and 1,999cc will be taxes an additional Rs 15,000 (roughly RM1,125), and cars with engine displacements above 2,000cc will be taxed an additional Rs 20,000 (about RM1,498).

“This hike was unforseen and unexpected. It will have an impact on demand and we will have to revisit our production forecasts and margins, which are already under pressure. There is nothing to suggest that just because a car has a bigger engine, it will consume more fuel,” said Ankush Arora, vice president (marketing and sales) at GM India.

Of the three Proton cars that the Economic Times reported will see an Indian market launch sometime next year, only the Proton Persona with a 1.6 litre engine will be affected by this increase in tax, as the other two cars are 1.3 litres and below.