Frequent policy changes, taxes hurting luxury car market: Audi India head
Frequent and sudden policy changes, coupled with high taxation, have stymied the growth of the luxury car market in India, said a top official at Audi India. Cars priced above Rs 25 lakh account for a per cent in India’s 3 million-car market and share has remained unchanged over the last five years.
The absence of a consistent long term roadmap has been hurting the overall plans including introduction of new models, said Balbir Singh Dhillon, head of Audi India, referring to the month-old government regulation that makes it mandatory for imported models to get BIS (Bureau of Indian Standards) certification for alloy wheels, windshield and wheel rims.
A regulation like this will eventually force companies to reduce the number of models it plans to bring to India, he said.
Audi launched the Q2 last week as part of a larger strategy to bring more volume models to the Indian market. It will launch at least half a dozen models in 2021 as part of the aforesaid strategy.
“Eighty per cent of the volumes that we sell India will be assembled locally by 2021,” said Dhillon, adding that the 20 per cent that will be imported will have only 10 models. “For such low volumes it is difficult to procure the parts such as an alloy wheel locally,” he said.
Such low volumes make it unviable for the alloy wheel makers to produce them locally and luxury carmakers should be exempted from such certifications, he pointed out. The volume and luxury carmakers are treated differently when it comes to taxation, so it is only fair that regulations are also different for this category, he said.
“The luxury segment attracts the highest import duty as well as the GST. That’s one of the reasons why the luxury cars account for just a per cent of the total sales in India,” said Dhillon.
All automakers will have to comply with the new regulation, but local arms of Mercedes-Benz, BMW and Audi will suffer the most as they have the highest ratio of imported parts. The companies have made multiple representations through the auto industry body, Society of Indian Automobile Manufacturers (Siam), and are seeking more time for implementation.
These regulations will breed a lot of uncertainty for carmakers. There is no defined long-term roadmap and this will create a lot of hassle for all, specially for global carmakers, who are surviving on thin volumes. “The hassles will go up and finally the global players may start ignoring the Indian market,” said Puneet Gupta, associate director at I.H.S Markit.
Dhillon said while the companies clearly understand that the regulations have a long-term objective of making India self-sufficient, companies should be given sufficient time as the models are planned 3 to 5 years in advance and so, implementing anything within six months to a year is challenging. “Eventually, will have to reduce the number of models,” he said.
Owing to the Coronavirus (Covid-19) pandemic, this year is going to be tougher for luxury carmakers. According to ICRA’s estimates, the segment is expected to decline 40 per cent in FY21.
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