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Luxury Cars May Get Dearer : Courtesy Budget 2011
These companies would have no other go than rising their prices. The budget defines the CKD units as “ a vehicle, including two-wheelers, eligible for concessional import duty is being inserted to exclude from its purview such units containing a pre-assembled engine or gearbox or transmission mechanism or chassis where any of such parts or sub-assemblies is installed,". On the other side, it is known that the companies doing business in India by deriving the CKD of pre-assembled and fully imported components such as engines or gearbox or transmission are not eligible for the reduction of 10% import duty.
These vehicles will be treated as fully-built units which normally has the provision of 60% import duty and this will make the net duty to 110% after adding counter-vailing duty. This will be effective for the entry-level luxury cars like BMW 3-Series, 5-Series sedans and X1 SUV; for Mercedes it will be for C-Class and E-Class sedans. As for Audi this duty will cover for its A4 and A6 sedans, and Q5 SUV. In addition the Japanese giant Toyota"s Fortuner , VW"s Jetta and Passat and Ford Endeavor will also be blanketed under this provision. Immediately a representation has been made to the SIAM for taking up the matter to the government of India"s Finance Ministry. They fear that the provision will certainly affect their prospects in near future making a direct impact on affordability. Such a provision will end up with negative investment thoughts from the company. These companies have put the matter to the notice of the embassy of their country for necessary steps. In recent months, the luxury car segment picked up gradually as a result of affordable prices and growing economy in the Indian market.
The growth rate of this segment from the sale volume of these companies has been 70% despite being nascent. In 2010 the net volume of luxury car market stood at 18000 units which is expected to double in another two or three years provided there had been reduction in the said duty structure. It all depends on the government"s gesture to reduce this duty, the sources said.
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