Luxury car manufacturers are now gearing up to locally assemble strategic models rather than importing Completely Built Units, thanks to soaring import duty on completely built units.
While the car manufacturers have to pay just 30 per cent customs duty on the car under the Completely Knocked-Down (CKD) kit route, the duty on Completely Built Units has been increased from 60 per cent to 75 per cent in the 2012 Budget. If car manufacturers import car components completely knocked, they are asked to pay just a 10 per cent import duty.
Luxury car manufacturers are already assembling most of their main models in India to avail 10-30 per cent duty, depending on the level of localization, as this is a key requirement to be price-competitive in the market.
The problem with high-end luxury models is that these models sell only in small volumes, and thus do not justify the investment for establishing a Completely Knocked-Down assembly operation. But, the rise in customs duty on imports has broadened the price gap drastically with locally-assembled cars.
Ratan Tata-promoted Jaguar recently announced, “We will look at assembling the XF in India if there is a business case for it.” Jaguar is one of the most hurt victims of rising recent import duty as none of its cars are assembled locally in India.
Rival manufacturer Audi is already assembling its Q3 and Q5 cars in its Aurangabad plant, while Mercedes is preparing to localize its M-class and the big GL.
At the top-end of the luxury car saloon section, only the S-class is presently set up in the Indian market but BMW proposes to begin assembly of the facelifted 7-series when it goes on sale by 2012 end.
“We can anticipate additional products to be locally made but they should also have a levelheaded biz case,” says BMW India’s president, Andreas Schaaf.
But, there doesn’t appear to be a sound biz case for local congregation of the Audi A8, the 7-series’ main rival.
“The A8 has an aluminum body that turns it hard to construct in a CKD process,” says Michael Perschke, Audi India’s boss.