Today, the luxury auto segment in India was in trouble as Union Finance Minister Nirmala Sitharaman presented Budget 2023, which proposed a new tax structure for vehicles manufactured abroad and sold in India. In a move supposedly aimed at further boosting domestic manufacturing, Budget 2023 has proposed increasing customs duties on imported cars, including electric vehicles. Customs duties on imported complete vehicles (CBUs) to India will increase to 70% from 60%. Even semi-completed vehicles (SKDs), including electric vehicles, will be subject to a tax of 35%, up from 30%.
Luxury car manufacturers in India, from Mercedes Benz, Audi to super luxury car brands like Porsche and Lamborghini will be affected by the new tax regime on imported cars.
In addition to cars brought to India through the import of CBUs, tariffs on tram in the form of CBU, in addition to the cost, insurance and freight (CIF) value of more than $40,000, has also been increased to 70%. Previously, CBU and CIF units costing more than $40,000 or 3.0-litre petrol and 2.5-litre diesel vehicles were typically subject to 100% of customs duties.
High tax rates are one of the reasons why Tesla has not been able to penetrate the Indian market despite extensive lobbying in recent times. Other car manufacturers also expressed concern about the high tax on imported car models and hoped that the Center would reduce the burden on this year’s budget. Santosh Iyer, MD and CEO of Mercedes Benz India said: “We look forward to revisiting the current import duties on electric vehicles to boost their demand, leading to faster acceleration to achieve the Government’s vision of a sustainable green mobility ecosystem in the country. “
Mercedes Benz is one of the luxury automakers that also assembles their units in India, besides delivering models via the CBU or SKD route. One of the more recent examples is the new S Class and its electric version of the EQS. The German auto giant has rolled out both domestically produced units as well as overseas manufactured units in the country. Locally manufactured units cost much less than CBU or SKD units.
The luxury car segment in India over the past two years has seen significant growth, especially in the ultra-luxury segment. Porsche India had the most successful 2022 in terms of sales as the German high-performance carmaker delivered 779 vehicles, of which 399 were Cayenne SUVs. Lamborghini also achieved its best year ever in India in 2022 when the Italian manufacturer sold 92 vehicles.
First published date: February 1, 2023, 15:48 pm IST