With the formal budget announcement of 2018, locally assembled cars and bikes are all set to become expensive soon. The Completely Knocked Down (CKD) models that are imported from international countries and are assembled in India have become pricier due to increase in tax. Car manufacturers like Mercedes-Benz, BMW, Jaguar Land Rover and Volvo will be affected by the tax raise.
Such cars and bikes will see a rise of tax between 3 to 5 percent as Finance Minister Arun Jaitley has proposed an increase in customs duty on CKD motor vehicles. The import duty on engine components could be raised from current 7.5 – 10 percent to 15 percent. The tax hike may also affect the duty of vehicle parts that are elements of CKD kits.
The customs duty on Completely Built Units (CBUs) have been increased by 5% and now stands at 25%. This could affect the overall import duty on CBU cars, which already stands at 180%.
Roland Folger, MD & CEO, Mercedes-Benz India.
“The increase in the basic customs duty of auto parts, accessories and CKD components is unfortunate and comes as a surprise. It will highly restrict the growth of the luxury car industry,”
Rahil Ansari, Head, Audi India said,
“Increase in customs duty is going to definitely affect the prices again, which will further confuse the customer The Union Budget 2018-19 is disappointing and against the spirit of partnership,”
The move is being seen as a step to promote “Make in India” initiative. However, this could also prove to be a big setback for the luxury car buyers and manufacturers in India.
Currently, manufacturers assemble many of their high-end vehicles like Mercedes-Benz S-Class, Mercedes-Maybach S500, E-Class, GLC, BMW 7-Series, Volvo XC90 and Jaguar F-Pace being locally assembled to make the prices competitive in the market.
Even many bike manufacturers like Suzuki import the Hayabusa as a CKD model in India to price it aggressively. With the rise in tax, such models will be affected too. The high-end cars had seen a growth in terms of sales in last financial, which could be affected in this financial year due to the rise.