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Old 26th October 2010, 07:16   #31
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@tsk1979 Thanks for a very interesting thread.

I have been following this thread very closely and realised most of the contributors have a well thought out reasoning for their argument. Both FOR and AGAINST.

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Originally Posted by tsk1979 View Post
Tariffs were removed after 15-20 years. But in India, is there even a minor push for rationalizing tarriffs once the industry matures(5-10 years from now?)
Just a lateral thinking !
What is stopping foreign mfr to put up shop in India ? Earn more is good enough incentive.
IMHO they are not willing for long term commitment.
Than why do we need imported cars cheap ?

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Originally Posted by genjew View Post
I'm curious. Can anyone explain why high import taxes are justified for Vehicles costing more than 1 Cr. or 2 Cr? [Other than the rational that those who buy those vehicles can afford to pay tax. That's not a reason, its just rationalizing]
Vehicles costing even 1/100 Cr. remains a luxury in India. Because more than 90% of Indians cant afford them.
Let alone affording a car, a large chunk of these 90% Indians can NOT even afford a square meal.

They need to be supported. And supposedly (alas!) these taxes are required to do that. Could you see the rationale ? May not agree on the efficacy.

Cheers

Last edited by sanagg1 : 26th October 2010 at 07:18.
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Old 26th October 2010, 09:52   #32
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The observation is interesting but the discussion got sidetracked in your own post boss.

The money they make is subject to the import transaction pricing, the taxation procedures etc and is not related just to the 8L that toyota makes on fortuner or tata does on safari! 8L is not the margin.

And then you dive into the very true and vexing issue of automobile import taxation but which has nothing to do with the thread title!!

IMO, Yamaha makes lot more money on the R1 imports than it does on the economuters because they dont need to do any major advertising / network expenditure!!
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Old 26th October 2010, 10:53   #33
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Quote:
Originally Posted by phamilyman View Post
IMO, Yamaha makes lot more money on the R1 imports than it does on the economuters because they dont need to do any major advertising / network expenditure!!
I wanted to bring out similar point with some hard data that I have with me.

Following figures are for one of the BIG three German companies. I am hiding exact figures.

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Sales and distribution cost is not considered here, post which the net profitability will further come down.

Considering same sales and distribution cost (and overheads) for both the categories, CBU cars roughly give 5% more profits over Indian built counterparts.
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Old 27th October 2010, 10:10   #34
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Interesting thread, Tanveer. In the longer run, and with the right product, local assembly is far more profitable than directly importing. The high import taxes is one thing. However, a well-priced locally built / assembled car will also result in far greater sales. Who do you think will make more money? Toyota with its 22 lakh rupee Fortuner or Hyundai with the 27 lakh rupee Santa Fe?

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Originally Posted by idofsuresh View Post
Maruti made a profit after tax of ~8% last year. I don't think it can be called as a Fat profit margin.
Well, Maruti's chunk of sales come from the extremely price sensitive 2.5 - 4.5 lakh rupee segment. Don't miss the fat royalty fees paid back to Suzuki JP either.

As one moves up segments, profit margins get larger & larger. Not only because of the product's higher selling price, but also because the difference in manufacturing cost is far lesser in proportion. The differential production cost of a 3 <-> 5 series BMW is maximum 15%, yet the ex-showroom is 50% higher.

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Originally Posted by prateek99 View Post
Following figures are for one of the BIG three German companies.
Hahaha, the numbers are a dead giveaway.
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Old 27th October 2010, 10:20   #35
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This is a really interesting post. I think its not just local vs imported. Its also badge vs badge!

My dad and I were actually working out a plan to purchase our first Mercedes in about 2 years.

We did a spec to spec comparison of the top end VW Jetta with the Bottom / Middle C Class or 3 Series and found it to be very similar !

Yet the OTR Price of the Jetta is about 17 Lakhs while that of the C Class is 34 Lakhs!

After that analysis, I think our mercedes plans are shelved!
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Old 27th October 2010, 11:56   #36
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From the Country's point of view, there is nothing wrong in having a 110% rate structure. Justification is seen in the huge growth acheived by our domestic industry in both volumes and quality. Would all this have happened if the duty was say, half of it? I doubt. I think we might have a 50% CBU market with 50% import duties.

Remember, many developing countries have high import taxes coupled with restrictions on FDI in auto sector (like Malaysia), which is not the case here.

Despite being an auto enthusiast, one cannot oppose the view that this is an industry which should be controlled, at least from imports which add zilch value to our economy in the longer run.
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Old 27th October 2010, 12:11   #37
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Quote:
Originally Posted by GTO View Post
Hahaha, the numbers are a dead giveaway.


GTO, since this is a public forum I won't post the document here, as this is a private limited company.

Mailing you some part of the document at UserID@team-bhp.com

Hope, it will clear your doubt.
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Old 27th October 2010, 13:11   #38
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Quote:
Originally Posted by tsk1979 View Post
....
So a 12L Ex showroom Scorpio or Safari nets approx around 8L to the mfr

Now take the case of a 20L Fortuner.

Take away the taxes, and Toyota gets around 8L for the vehicle, same as what Mahindra and Tata get...
....

Why are cars from abroad taxed so heavily?

The answer lies in lobbying by local car makers.
So next time you rue that the Santa Fe is so expensive, or Toyota overprices the Fortuner as compared to what it sells in Thailand, remember, more than half the cost of the vehicle goes to the Govt as Taxes. .....
Quote:
Originally Posted by ACM View Post
The observations are very nice and quite valid, but the CBU example needs to be changed.

Fortuner is made in India and is not a CBU, and not CKD or SKD either. It is manufactured on the same line as the Innova. Yes some components are Imported and the % is higher than in case of India manufactured Items, but the Indian manufactured cars to import a fair bit.

Outlander and expecially the CRV are better examples of CBU.
I would like to introduce the case of BMW and MB here. I suppose the 3 series and C class cars are assembled in India which are brought down as CKD kits. I think CKD kits attract 25% tax. They cost around $30K in USA. Thats around INR 15 lakhs. Its obvious the manufacturers' cost is less than 15 lakhs. Shall I say 12lakhs??(I have put a bit higher price compared to the example of Safari or Scorpio mentioned above!!)

Now coming to calculations part:
12L + 3L(25% tax) + 1L(shipping??) + 3L(profits??) + 3L (cost for assembling??) = 21L.
But they are around 30L. Is the profit on such car is around 3L or 10L?? (I am not sure whether the corporate editions are there in USA so .... I might be wrong. Please correct me if required!!)


Quote:
Originally Posted by 2cents View Post
....
Say, if 3-series were to be manufactured in India, will its price be close to 12L? It doesn't look like one for sure! ...
I dont think they would do that!! In India cars are also categorized based on the price. I dont think BMW would like to price the 3 series in the Superb price segment(20L).
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Old 27th October 2010, 14:24   #39
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just wanted to add my opinion here:

Why is everyone just thinking about the cost ? Why isnt anyone comparing cost to quality as well ! Most of the times imports are with much better built and quality than the local ones (specially in india).

Living in India has always taught me to "compromise". VFM cars(locally manufactured) "usually" earn more not just coz of its low cost but also for bundling a lot of features, right from FE to gadgets. Now if that product is compared to an expensive import, the quality of features and gadgets has a lot of difference (but expensive).

thats just the way the Indian Market is !!
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Old 27th October 2010, 15:07   #40
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What I propose is that the tax on CBUs may continue to be the same, but there should be some restrictions on the car companies. Restrictions can be something like:

- Only a fixed number of CBUs (lets say 100) would be allowed to be imported per month.

- After selling a certain number (lets say 1000) of CBUs or after selling the CBUs for a certain period of time (lets say 1 year), the car company can't sell it as CBU anymore. They should produce it in India if they want to sell it here.

Such rules would force car companies to produce more cars/SUVs in India and at the same time, it would give a fair chance to the car companies to test the waters by first going the CBU route and then start manufacturing in India if the model becomes popular.

In the CBU route, neither the car company benefits nor the customer. Only the government earns obscene amount of taxes for no reason.

Rohan
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Old 27th October 2010, 16:26   #41
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Quote:
Originally Posted by rohan_iitr View Post
In the CBU route, neither the car company benefits nor the customer. Only the government earns obscene amount of taxes for no reason.
That is what every government wants right.
The hell with the consumers and the industry, if the politicians coffers are full then who cares.
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Old 28th October 2010, 19:51   #42
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Default What rich country car makers have to do to be successful in the BRICs

>>>

Might be slightly tangential and dated (circa Nov 2008), but attached here is an article from The Economist on what car makers from rich countries ( Europe, US etc.) have to do, to succeed in the BRICs.

All trademarks acknowledged. Emphases mine.

Regards, drive safe
Attached Files
File Type: doc A survey of cars in emerging markets.doc (120.5 KB, 350 views)
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Old 28th October 2010, 20:32   #43
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Quote:
Originally Posted by issigonis View Post
>>>

Might be slightly tangential and dated (circa Nov 2008), but attached here is an article from The Economist on what car makers from rich countries ( Europe, US etc.) have to do, to succeed in the BRICs.

All trademarks acknowledged. Emphases mine.

Regards, drive safe
An excellent article, thanks for sharing.

The article is very informative and provides a very good insight into the emerging market's needs for the global brands.
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Old 28th October 2010, 21:59   #44
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@Tanveer

Good Topic for discussion! The high Excise duty on imported cars is limiting exposure of international car manufacturers as well. A car manufacturer would not want to commit crores of Rupees until they are sure of the car's market in a given country.

Now, Govt. poses excise under the name of developing/fostering Indian Manufacturers until they attain competitiveness and it is in fact a debatable topic, how long does Tata/Mahindra or Maruti would need to be competitive?

Going by Economics, an open market will bring in competitiveness amongst manufacturers and hence benefit the consumer. But, in Indian automotive Industry, barriers of entry are high. I look forward to the day when we get truly international standards in our cars.
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Old 28th October 2010, 23:31   #45
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I've come across this paper. Maybe it can shed light on the govt policy towards the auto industry. It has a very detailed account of what the govt intends to do. Its a good read. Enjoy!!


Revving Up! Indian Automotive Industry ? A Perspective
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