Thinking of purchasing a luxury car? Hold your horses (we mean engines!) The union budget 2018 is all set to change the way you think about making that investment.
There was a lot expected from the Budget 2018, especially for the automotive industry. While luxury car makers were looking at lowering of GST rates on its cars, electric car makers were also looking to get a push for the industry, considering that the government is heading towards going all electric from 2030. However, none of this was tabled and that was a disappointment. To add to this, the government announced a further hike in the rates of import duty which have been put into place to give way to companies to spend and make in India.
Cars brought to India in completely built up (CBU) or fully-imported form could also get pricier. The government has made a proposal for a rate hike on one section of customs duty on CBUs from 20 percent to 25 percent. This move could drive up the total import duty; which currently stands at an already steep rate of over 18 percent.
The Finance Minister proposed raising the custom duty on luxury vehicles that are not fully made in India but built using kits manufactured outside the country and is finally assembled in India from 10 percent to 15 per cent. Those vehicles which include both cars and motorcycles is all set to become costlier because the custom duty has been raised . Most of the engines that power luxury cars are not made in India and are imported and assembled here. The hike impacts luxury car and bike manufacturers like Mercedes-Benz, BMW, Audi, Volvo, Jaguar Land Rover, Harley-Davidson, Triumph, all of whom have set up assembly plants in India. There are other car makers who want to enter the country, like Tesla, but given the hike in the custom duty now, it's highly unlikely that we'll see the company enter the Indian market this year either.
The auto components manufacturers have been most affected by this decision and of course we'll see a hike in the prices of some cars soon, especially those which have a low level of local content and assembled parts in them. The industry of course has taken this into consideration and the overall feeling is that of anticipation.
Keeping our fingers crossed and hoping for Acche din to arrive soon :)