Premium car makers which do not produce models locally but assemble these here are busy exploring ways to avoid a price rise in the wake of the government’s new duty structure.
Daimler AG, which makes luxury cars under the Mercedes-Benz brand, BMW, and the Volkswagen brands such as Audi, SkodaAuto and Volkswagen are said to be considering improving localisation levels and fine-tuning imports.
All these are affected by the significant change in the customs duty structure imposed on some of their volume generating models. The finance ministry had raised the duty on engines, transmissions and gearboxes assembled outside India and later mounted on models put together here.
The ministry had raised the customs duty on such engines, transmissions and gearboxes to 30 per cent from the earlier 10 per cent. This took effect from April 1.
The Society of Indian Automobile Manufacturers had approached the government to extend implementation of the new rule by 18-36 months, saying companies needed time to respond to the change. The finance ministry is yet to respond.
However, no company affected has so far raised prices. A senior technical expert agreed it was possible to separate the engines, transmission and gearboxes into two or more parts before being brought to India. Doing so would qualify for the concessional customs duty of 10 per cent.
BMW seems to be trying this argument. “Our stand is that we are fulfilling all the norms as required for meeting completely knocked down (CKD) rules. BMW India is not importing any fully built engines, transmissions and gearboxes,” stated a spokesperson.
BMW India is the leader in the Indian premium car market, posting a growth of 80 per cent last year with sales of 7,079 units. The spokesperson clarified there’d be no price rises in the cars produced in India through the CKD route.
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