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Luxury Carmakers Hike Prices
Luxury carmakers Mercedes-Benz, Audi, Land Rover, BMW and Renault have said the increased tax rates would reflect in the prices of their models soon. Mercedes-Benz India CEO Peter Honegg said: "We are looking at increasing prices for one of our major models in the next few weeks. We would be paying high tax on one of our cars with a high proportion of pre-assembled components. The new policy regulation has forced us to bring in new prices soon." The Mercedes is the firm's highest priced car ranging between Rs 84.3 lakh to Rs1 Crore. Mercedes said new cars built in April 2011 will have revised prices.
Land Rover, BMW, Audi and Renault are also assesing the quantum of price hike required. Audi sells luxury car priced between Rs 30 lakh and 90 lakh. Michael Pershke, chief executive officer, Audi India said: "We are studying the government policy and will take appropriate decisions to amend our production strategy suitably." Audi's A4, A6 and the Q5 SUV will attract the government's increased tax rates.
Tha tax hike will also affect models that are yet to reach Indian car showrooms. French carmaker Renault has said it could hike the price of the Fluece sedan by Rs 2 lakh. The Fluence sedan will be launched at the carmaker's facility in Chennai later this month. Land Rover has said the recently launched Freelander 2 model could cost Rs 2 lakh to 5 lakh more. The Freelander 2 is being assembled at Tata's production facility in Pune.
As per the government's latest guidelines on CKD vehicles, the custom duty of 10 per cent will be charged on engines and gear boxes that have to assembled in India. If the engines and gearboxes are imported as an assembled unit, they will attract a dutry of 30 per cent. Further, if the engine and gear box are fitted in to the body shell of the vehicle, then the custom duty will be 60 per cent. BMW is the only carmaker who has adapted itself to the new norms and its India chief Dr Andreas Schaaf has said BMW would not increase prices of its luxury models
The government's decision to increase custom duty on locally assembled cars will pinch the Indian luxury car buyer. The government had restricted 100% FDI in car manufacturing to encourage foreign carmakers to establish joint ventures in India and build cars locally. However with this increased tax rates on completely knocked down (CKD) vehicles luxury car sales are bound to take hit.
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