Toyota and Nissan Motors are no more stepping forward with their plans to introduce their luxury vehicles- Lexus and Infiniti to the Indian market. One of the reasons for the plans on hold could be the pending decision of the government on the India’s free trade with the European nations. The decision of Nissan and Toyota could pave a smooth way for the other manufacturers like BMW, Mercedes-Benz and Audi to enter into the Indian Auto market aggressively. Another reason for the hold could be the fall in demand for these cars as the value of rupee has been falling continuously.
The policy taken by the Indian Government is that the import duty for the European cars would be reduced for 5 years as per the free-trade agreement. The import rate is currently 60% and when the policy will be implemented, the tariffs will come down to 30%. The first year will have the imports of about 40,000 cars and each year there will a rise by 5,000 cars. At present the custom duty charged on fully built cars in India is about 60%-75% depending on the factors-price and power of the cars. After adding countervailing duty, sales tax and other cessess, the total duty on the fully built imported cars varies from 135%-157%.
The plans for Lexus were announced by Toyota in last year November and the Infiniti plans from Nissan were revealed in March, 2012. As stated by a senior director of automotive practice , Frost & Sullivan, Mr. V. G. Ramakrishnan, these Japanese companies are holding back their launch plans as the government’s decision on the free-trade is pending as some more clarity is expected before these companies make huge investments. As per the MD & CEO of Nissan India, Takayuki Ishida, Nissan is finding out the different possibilities to expand the availability of Infiniti and its reach. When the company will feel that the business opportunities are taking positive turn it will decide on importing the luxury vehicles in India.
As stated by the industry analysts, both the Japanese companies are reviewing the current situation of Indian Business Scenario as the import duty is increased and the demand is on decline. The other major factors behind the hold are fall in the value of the rupee and the pending trade talks of India with the European Union. The EU has asked for sharp duty cuts on these fully built cars under FTA and as per the media reports, there may be huge reduction in the customs duty on imported cars.
In case FTA agrees for the concession of import duties, there are chances that the three major luxury car makers from Germany; Audi , BMW and Mercedes Benz would be able to capture the Indian Auto market very easily than the rivals-Japanese and American companies.
GM India has already come out its plan to launch the Cadillac, its luxury brand in India and will focus on the Chevrolet brand and huge investments are made for that. As stated by Hormazd Sorabjee, the editor of Autocar India, The increased custom duty on the fully built imported cars in the last budget did not make it possible to import them to India easily.
As per the trade sources, the Japanese car companies are keeping close eye on the situation. In the Tokyo Motor Show in 2011, Toyota had announced that Lexuswould be launched in India by 2013 Lexus had entered to the US market first and then it expanded itself in Europe and Japan. The high-end consumers in India are well aware of the Lexus brand and the market analysts are hopeful that the launch of Lexus in India would be an easy job for the company.
The launch of Lexus in India was supposed to bring high hopes for Toyota Kirloskar, which wanted to increase its presence in the Indian car market as it has the presence of less than 5% currently.
The Japanese company has thought of making Camry in India which was a CBU till date. So the price would be lowered and sales may rise for the Camry.
Nissan India, the company already selling Micra and Sunny inindia was planning to launch Infinity brand which again had kept the decision on hold for the favorable time to come.