Post-budget, luxury cars to get more expensive

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Following the hike in excise and customs duties in the Budget for 2012-13, luxury vehicles in India are set to become more expensive by up to Rs 3 lakh as auto makers have decided to pass on the additional burden.

Premium vehicle makers including Mercedes Benz and Audi, have decided to increased the prices of their vehicles and are currently finalising the exact amount of hike, while BMW is evaluating its options.

"We are going to pass on the additional burden to customers. We have not decided the exact amount yet, but on an average it will vary between Rs 2 lakh and Rs 3 lakh," Mercedes Benz India Director (Corporate Affairs and HR) Suhas Kadlaskar said.

The premium car makers usually bring in advanced technology into the country and this step will be very counter productive, he added.

"The Budget is very disappointing for us. We were hoping for some reduction in taxes for large vehicles instead of hiking it further," Kadlaskar said.

Mercedes-Benz India currently manufactures its C, E and S Class luxury sedans in India. The existing prices of these cars vary between Rs 26 lakh and Rs 1.01 crore.

The other models that the comapny sells here through fully imported route are ML-Class, GL-Class, E-Class Coupe, E-Class Cabriolet, R-Class, SLS AMG, AMG-Series and Maybach. As per its website, these vehicles are available between Rs 45.39 lakh and Rs 5.85 crore.

Another luxury car maker Audi India also said it may hike the prices of its products in the country.

"The increase in excise and customs duty on large cars in this budget is very surprising. This increase comes at a time when the Indian automotive industry was finding favour with customers looking for better and efficient cars," Audi India head Michael Perschke said.

The company may now re-evaluate its pricing strategy in India, he added. Audi also assembles some its premium models in India. These are sedans A4 and A6, and sports utility vehicle Q5. The prices of these vehicles start from Rs 27.7 lakh.

The company also imports other models such as A7, A8, Q7, RS5 and R8. The prices of these cars start at Rs 55.35 lakh.

Finance Minister Pranab Mukherjee had announced hiking the basic customs duty on imported vehicles valued over USD 40,000 and with engine capacity of over 3,000 cc and 2,500 cc for petrol and diesel driven vehicles respectively to 75 per cent from 60 per cent.

Another luxury car maker BMW, however, said it has not taken a decision on passing on the burden to consumers.

"We have not decided about the price increase yet. We finalise our startegy next week whether we will pass on the additional burden to consumers or not," a BMW India spokesperson said.

In the Budget excise duty on cars have been also increased. Petrol cars with engines under 1,200 cc and diesel cars with engine capacity under 1,500 cc, but the length exceeding four metres to 24 per cent from 22 per cent and a fixed duty of Rs 15,000.

Petrol and diesel driven vehicles having length exceeding four metres and engine capacity of over 1,200 cc and 1,500 cc respectively will now be charged with an ad valorem duty of 27 per cent, instead of the earlier 22 per cent and a fixed duty of Rs 15,000.

Society of Indian Automobile Manufacturers (SIAM) said the vehicle makers were not expecting duties on large cars to go up in the Budget.

"While the auto industry appreciates that there was a compulsion to increase base rates of service tax and excise duty, the industry had hoped that the excise duty on large cars would have come down from 22 per cent to 16 per cent rather than going up," SIAM president S. Sandilya said.

The 27 per cent excise duty will lead to significant increase of tax for large premium cars, he added.

Sandilya, however, welcomed the move to impose higher customs duty on imported big luxury vehicles.

"The increase in customs duty on cars and MUVs, valued above USD 40,000, from 60 per cent to 75 per cent seems to be a step to encourage local manufacturing, value addition and employment," Sandilya added.