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Old 1st August 2012, 10:58   #31
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Default Re: 10% Import Duty on BMW and Porsche

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Originally Posted by shivshanker View Post
You may have to pay just 10% duty on Porsche and BMW; India in talks with EU to slash import duty.

The above news caught my attention while glancing the online edition of Economic Times today.

At first i was impressed that the our Govt. is coming out of the closet. But if I re read the article, I feel that we are not doing justice to the local Indian population.

Rather than making helping the masses and provide jobs to the common Indian public, cannot understand as to why is our Govt. so keen on pleasing the EU.

The net result would also mean a loss of 50% Import Duty on 2.5 Lakh cars over the next few 5 Years.

I am for keeping the import duty high on all EU cars so that these car manufacturers seriously consider setting up production base in India.

Do any other Bhpians share my views.?
If you want to function in the world, you have to give and take.
This action will involve some "giving".
But you have to see the balance.
What if EU decided Indian software needs a 110% import duty?
In the EU, cars manufactured in India are charged very low duty(go look it up on google), so they are asking for reciprocity.
In the end the govt has to see whether the end results is a benefit or loss.

India is a hub for small cars for many manufacturers. If India lost the cost advantage due to duty, it would lead to a loss of lot more jobs.

So a cheaper Q3 may be fewer Fortuners(manufactured partially in India) being sold and some loss of jobs.
But an increase in duty by EU on Indian cars would mean 10X the number of jobs lost.

So from a ideological point of view, it makes sense to oppose this, but its best that such thoughts and talks remain confined to crumbling socialist coffee houses where they belong, and policy is made based on realities.
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Old 1st August 2012, 11:32   #32
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Default Re: Import duty on European cars to be slashed to 10 per cent?

I doubt this will happen to cars below the mid size segment. VW might as well mothball their plant and close down Aurangabad. India will need to protect the major portion of the car industry
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Old 1st August 2012, 11:59   #33
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Default Re: Import duty on European cars to be slashed to 10 per cent?

>>>

In the real world, each nation pushes for its interests. I expect India and the EU to behave in the same manner and gradually narrow down the differences with trade-offs without seriously compromising their interests. That is business. That is realpolitik.

I completely agree with the comments above that we as a nation have to be hard headed realists ( whether it be FTA policies or defence or balance of payments or whatever).

In this case I agree that if there is a drastic duty cut it will be focussed on vehicles i. which we are not likely to be produced and exported from in significant numbers and ii. which have growth potential in India from an albeit very low base

The luxury ( entry : 3/A4/C; mid : 5/A6/E/XF; top end : 7/A8/S/XJ) and the premium ( Porsches, Ferraris, Lambos, Astons and so on) classes will likely get the benefit, whereas our government will stand firm on not allowing duty cuts on the affordable 1/A/B/A3, which might be introduced sooner rather than later and which will have greater affordability amongst the rising numbers and apsirations of the upper middle classes, as these will sell in greater numbers.

I see the 'affordable' segment growing strongly to maybe 100k units pa soon and our government and SIAM would like our industry to enhance our design, engineering, support and other capabilities to encourage Europeans to manufacture and assemble these for local and going forward, international consumption.

Manufacturing plants head to regions with a few indispensable characteristics : rule of law, predictable ( and sane) government policies, necessary physical infrastructure, healthy labour relations and reasonable costs of production.

The government has to ensure these and then get out of the way. But will it?

Regards
issigonis
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Old 1st August 2012, 12:16   #34
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Default Re: Import duty on European cars to be slashed to 10 per cent?

Being an auto blog, I agree to a point that yes this is indeed good news, that finally we can be at par or nearly there compared to what Europeans pay for their autos.

But if this becomes successful and they decide to implement it to other segments or markets, then a lot of people in India are in trouble. Let me give an example to clarify this, as of today a one liter bottle of Imidacloprid costs 400 rs. The same sold by European companies cost around 550 Rs, they attribute the higher costs to imports duties and what not. Now if tomorrow the same bottle made in Europe touches down to Rs 420 - 450, who will buy the Indian made at Rs. 400. So either the Indian companies slash their prices and sell at a loss or completely pack up and go home.

Europe is a dying land, their own problems are surplus and mismanagement by their own people has led them to where they are today. They will be on the look out for emerging markets where they can throw their surplus stocks and recharge their own economies. The Indian manufacturer and the Indian SME is at a huge loss with this move. Come on if China was not enough now we got to compete with Europe as well.
And to those that say that Indian manufacturing houses had enough time to sort their stuff out, well its not that easy, Its not like some industries where your only investment is some computers and software and you are done. The government hardly helps SME's and small businesses so all burdens are borne by the enterprise itself.
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Old 1st August 2012, 18:39   #35
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Default Re: Import duty on European cars to be slashed to 10 per cent?

Local automobile prices is one thing that's least impacted by inflation (in fact got cheaper if you compare prices of 5 year old live model).

I think exercise cut will force Indian manufactures to cut down there heavy profit margins and give people value for there money, they have enjoyed monopoly for long now.
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Old 1st August 2012, 19:21   #36
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Default Re: Import duty on European cars to be slashed to 10 per cent?

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Yes I agree with the A8 example, now what stops Audi from selling the A1 @ 10 lakhs or Citroen C3 or VW golf. Each of these can sell 5000 cars a month I guess. I am sure Peugeot, Fiat, Renault, Seat, Ford (Europe), GM (Europe) and others have dozens of models that all of a sudden make sense for India. Then the 40,000 quota would run out in a couple of weeks!!!
That is something I didn't think of. But I doubt if we have much of a market for very small premium priced cars. The beetle and fiat 500 have struggled for that reason. A few hundred people might buy those as their show cars. Then again, we cannot predict consumer behavior. If the beetle was lets say 10 lakh rupees, would a lot more people buy it?
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Old 1st August 2012, 21:18   #37
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Default Re: Import duty on European cars to be slashed to 10 per cent?

I'm sorry about the ignorance but I have a very basic question:

If the cost of manufacturing cars in India is lower, why do we have to tax the imported cars which are made in "high cost locations" and hence expensive compared with an India made car? What is India's low-cost competitive edge?
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Old 1st August 2012, 23:42   #38
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Default Re: Import duty on European cars to be slashed to 10 per cent?

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I'm sorry about the ignorance but I have a very basic question:

If the cost of manufacturing cars in India is lower, why do we have to tax the imported cars which are made in "high cost locations" and hence expensive compared with an India made car? What is India's low-cost competitive edge?
AFAIK, cars cost higher in india because higher component of taxes and hefty profit margins (except the small hatchbacks) in the ex showroon price and not because of costly labor or material costs. If europian cars are imported with 10% duty, they will cost more or less the same.
Indian manufacturers are not worried about competing the costs but matching the quality and engineering with europe. Who will buy indian cars if europians are in the same price band? Taxing europians heavily makes them very costly and makes indian cars look more value for money resulting in their sales.
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Old 2nd August 2012, 00:03   #39
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Default Re: Import duty on European cars to be slashed to 10 per cent?

It is great news and I'm hoping to see this really happen.

How many more days are we going to support our local manufacturers? Why can't they improve at a faster rate? I'm not willing to buy the fact that our manufacturers are only 50-60-70 years old. So, does that mean someone starting today will give us a 50 year old product just because he's a new kid on the block? Only competition can help our local manufacturers.
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Old 2nd August 2012, 01:08   #40
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Originally Posted by vineethvazhayil

hen again, we cannot predict consumer behavior. If the beetle was lets say 10 lakh rupees, would a lot more people buy it?
If the Beetle, Mini amd Fiat 500 were priced at the equivalent of their normalized European prices,in India, then there would surely have been a lot more takers.
For example is if the base Mini One costs 10K GBP in the UK, it should be priced at about 9 lacs here. This would see greater adoption instead of the quite ridiculous 20odd lac tag it carries here!
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Old 2nd August 2012, 12:20   #41
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Default Re: Import duty on European cars to be slashed to 10 per cent?

When I had read the details of this agreement in its previous avatar there were other products included also like liquor (scotch and higher quality wines ) apart from automobiles. If the agreement ensures that only cars that cost 10 lakh or above can be imported at that nominal duty I don't think the domestic manufacturers will be devastated or there will be widespread job losses. An imported Jetta might cost lesser, I am just guessing. Or they could limit it to SUVs and sedans with the price limit thereby controlling the potential damage to the Tatas and M&M. Apart from the Aria & XUV what other vehicle really costs that much? What Tata should also rejoice is that they can now sell the Jaguar at a much lower price . In return India should bargain hard for access for its agricultural products and I think what they have asked for is a more lenient visa regime. The Europeans are known to be hard negotiators so the Indian side better be careful at how much they commit. This has been in the works for quite some time now and a year back when I had read about it the Japs and the Koreans were vociferously complaining about this and demanding a similar FTA agreement with them.

Last edited by samarjitdhar : 2nd August 2012 at 12:22.
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Old 2nd August 2012, 21:33   #42
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Default Re: Import duty on European cars to be slashed to 10 per cent?

Well, If the rule is passed, more European cars would be on the roads, less of the domestic kinds. Money would flow out of the country and would further create issues for our already destabilizing rupee. Is my economics right?
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Old 2nd August 2012, 22:23   #43
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Quote:
Originally Posted by troublemaker
I'm sorry about the ignorance but I have a very basic question:

If the cost of manufacturing cars in India is lower, why do we have to tax the imported cars which are made in "high cost locations" and hence expensive compared with an India made car? What is India's low-cost competitive edge?
Cost is low in India no doubt but after taxes cars made in India end up being more expensive and less spec-ed than their foreign counterparts. Taxing foreign cars is purely a entry barrier measure to protect the local industry. India's low cost advantage comes when cars made here are exported. Hope tHis answers your query
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Old 2nd August 2012, 22:24   #44
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Default Re: Import duty on European cars to be slashed to 10 per cent?

I have one query.

Does this duty cut apply to CBU cars or the spare parts also? AFAIK imported spare parts in India also attract the same amount of duty (75%??) as the CBUs.

So will European cars like Vento, Polo's engine related spare parts price also goes down?
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Old 4th August 2012, 00:12   #45
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Default Re: Import duty on European cars to be slashed to 10 per cent?

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Originally Posted by ajmat View Post
I doubt this will happen to cars below the mid size segment. VW might as well mothball their plant and close down Aurangabad. India will need to protect the major portion of the car industry
Well, considering that VW/Skoda has a significant percentage of their content being imported from Europe, I doubt if they would be too cut up about this policy! Might result in lower maintenance costs for Skoda owners
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