Why are luxury cars so expensive in India? We explain

The Toyota Camry is to the United States what the Maruti Dzire is to India. But in India, both cars sit poles apart. While the Dzire is the country’s best selling sedan, and is priced very affordably, the Camry is aimed at those seeking a luxury car and just sells about a 100 units each month. In sharp contrast, the Dzire sells over 10,000 copies every month. This massive disparity boils down to pricing.

Let’s talk pricing

Why are luxury cars so expensive in India? We explain

The Toyota Camry – in hybrid guise – costs about Rs. 22 lakh (27,000 USD at Rs. 80/USD). In the United States, nearly everyone and his uncle drives a Camry because its dependable, affordable to maintain, and of course a relatively inexpensive car. In India, the same car costs Rs. 50.53 lakh, making it two and a half times more expensive than its US counterpart. What gives? Taxes.

The Camry is not built fully in India but rather assembled here through imported Completely Knocked Down (CKD) kits. The Indian government levies a massive tax on all cars that aren’t fully built in India.

Just how much is the tax?

A LOT! Allow us to unpack this for you.

Toyota first needs to pay a 15 % import duty on cars imported into India through the CKD kit route. Let’s assume that the cost of a CKD kit is Rs. 20 lakh. After import duty, the CKD kit costs Rs. 23 lakh. Then the government imposes another tax in the form of the I-GST (Integrated Goods & Services Tax), at 18 %. And Toyota has yet to even begin building the car.

Once the car is built and dispatched out of the factory, the Government charges another tax: GST. This time around, the GST comprises of 2 components. Component 1 is 28 % tax (the highest GST bracket since cars are classifieds as luxury goods). Since the Camry is a fairly large car with an engine displacing over 1,500cc, there’s another cess of 15 % applicable on it. This brings total GST to 43 %, and the cost of the Camry to 38.8 lakh.

The car then leaves the factory and heads to the showroom, where you the customer buy it from. When you buy the Camry, there is one more big tax coming at you. Road tax! While different states of India charge different road taxes, let’s simply consider Delhi – the National Capital – for now. Delhi charges a road tax of about 10.6 %, which pushes the cost of the car to Rs. 42.9 lakh. You then have other charges to contend with such as 1 % tax collection at source (TCS) and insurance (about Rs. 2 lakh). The price of the car sits at around 45.3 lakh. Luxury cars such as the Toyota Camry and the Skoda Superb get pricier by about 120 % before they reach you, the buyer.

Why are luxury cars so expensive in India? We explain

CBU import cars’ pricing

In case of cars that are fully imported as completely built units (CBU), taxes are even higher. The import duty alone on these cars is pegged at 100 %. And the slew of other taxes sit above the import duty. Now, you know why so many luxury cars sold in India nudge the 1 crore rupee mark.