Clarification by government on CKD units

The Indian government has finally woken up and smelled the coffee. The Indian automobile industry as a whole and SIAM had requested clarification from the government regarding the exact meaning of CKD unit. The government in their response now has said that Completely Knocked Down units would mean that every component of the car has to be assembled in India. Most of the CKDs come with their engine already assembled from their mother plants abroad. However as per the new government directive, vehicles which don’t have their engines also assembled in India would face higher taxation. This in essence means that most of the luxury cars in India would now be priced higher than what they already are. The earlier budget constitution hinted at a 60% increase in price however the government has taken heed of the requests from the Indian automobile industry and have now increased the tax from 10% to 30%. The 60% hike would have meant that CBU and CKD units would cost the same.

Now cars assembled in India with fully imported gear boxes and engines would attract a duty percentage of 30%. Semi Knocked Down or SKD units could have a different duty structure. This means that the Germans like Audi and BMW would have to bear the higher taxation rates. Entry level luxury cars like the Audi A4 and BMW 3 series would now be charged about Rs 3-4 lakhs more than what they used to cost earlier. Well, if you are thinking that we aren’t mentioning Mercedes, then the reason is that Mercedes have been in Indian for quite a long time and during this time, they have already started assembling their own engines. It is only for the S-class that they have to import the engine as a whole. This means that prices for the C-class and E-class are unlikely to waver from their current pricing.

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