Go Back   Team-BHP > BHP India > The Indian Car Scene


Reply
 
Thread Tools Search this Thread
Old 9th March 2011, 23:56   #46
BHPian
 
Yeldo's Avatar
 
Join Date: Feb 2008
Location: Kochi
Posts: 719
Thanked: 644 Times
Default Re: Audi planning to exit India in the backdrop of recent budget proposals

Any new taxation proposal or trade barrier is unwelcome unless dumping and health/ hazard issues are involved as far as a consumer is concerned. But why this uprising by this particular manufacturer, I do not understand. Even though the German luxury brands manufacture certain models here, they price them on par with CBU imports. The Jaguar XF/ BMW 5/ Mercedes E is a case point. Similarly the Indian S Class is priced on par with the imported 7 and A8, and even the XJ. So may we infer that it is not the end price for the buyer, but the fat margins of the manufacturers that might be affected?

Well, who really cares, as some years back I bought an imported W210 Mercedes for a price only marginally higher than the W124 Mercedes that was being then manufactured in India. And a slightly used "bulldog" automatic Pajero for less than the slab- sided manual model initially launched by HM- Mitsubishi.

The previous generation Mercedes Benz W220 S320L was available even before MBIL launched it here, and that for approximately Rs 5L lower than Indian manufactured cars.

Last edited by Yeldo : 10th March 2011 at 00:01.
Yeldo is offline   Reply With Quote
Old 10th March 2011, 02:16   #47
Senior - BHPian
 
mdsaab's Avatar
 
Join Date: Jul 2008
Location: Pune
Posts: 1,624
Thanked: 446 Times
Default Re: Audi planning to exit India in the backdrop of recent budget proposals

Wow thats a huge statement to makke. Dont you think their sales would start taking a hit from today. People on the lookout for a luxury car with big bucks in hand are going to think twice now before laying their money down on a table at an audi showroom.
Doubt that they would go ahead and shut shop though you never know.
mdsaab is offline   Reply With Quote
Old 10th March 2011, 11:27   #48
ACM
Distinguished - BHPian
 
ACM's Avatar
 
Join Date: Mar 2008
Location: Mumbai
Posts: 4,156
Thanked: 2,461 Times
Default Re: Audi planning to exit India in the backdrop of recent budget proposals

Quote:
Originally Posted by xingamazon View Post
Well my question is here,
1. is the Indian government ready to establish Free trade agreements with the European countries for car exports.
2. Is the Indian government ready to provide infrastructure such that a manufacturer setting up facility in India can easily take the car-containers to his shipping yard and from there export the vehicles.
3. Do they have guts to guarantee a customer base to enable atleast 5K sales per month to these vehicles.
We are at a stage where govt assumes they can command these companies, but its actually just the starting stage, if you try to take them on, you will be the looser.
For those appreciating govt move, brace yourself to buy Ambassadors again. All the best.
Xingamazon those are radical views, but I guess each one has his take.

1) Why should they
2) The worry is not about exporting cars, even if the manufacturing is only to meet the India market it will be enough it is big enought overall today. So the facility that you mention is not really required.
3) Why should the govt guarantee a customer base, that is for the brand and the vehicle attributes to create.

We are not at the starting stage right now, already we have local manufacturing happening for TATA, FIAT, Maruti, Hyundai, Ford, GM, VW and Skoda right here in India. Of these the first 4 also have engines and gearboxes being manufactured in India am not sure of the rest.

Why would we need to go back to the Amby days, already the first 4 mentioned above provide much better options that are locally manufactured with local contribution in excess of 90%.

We will really not loose the world even if all the 3 germans move out. (But they won't)

As we have over time been rationalizing some of the brands have limited them selves to only SKD (semi-knockdown kit) manufacturing, (and have been calling it CKD (completely knockdown kit)) and that is something that we do not need today, it has to move to true CKD where in they will themselves see the advantage of procureing some of the components locally at much better costs. In SKD the temptation to go local does not exist. Many others are already following either 100% local manufacturing or genuine SKD and they need to be appreciated and given an advantage over the CKD guys.
ACM is offline   Reply With Quote
Old 10th March 2011, 11:31   #49
Senior - BHPian
 
asr245's Avatar
 
Join Date: Dec 2007
Location: Gurgaon
Posts: 1,135
Thanked: 360 Times
Default Re: Audi planning to exit India in the backdrop of recent budget proposals

Quote:
Originally Posted by xingamazon View Post
Well my question is here,
1. is the Indian government ready to establish Free trade agreements with the European countries for car exports.
2. Is the Indian government ready to provide infrastructure such that a manufacturer setting up facility in India can easily take the car-containers to his shipping yard and from there export the vehicles.
3. Do they have guts to guarantee a customer base to enable atleast 5K sales per month to these vehicles.

Unless the govt's answer for the above question is true. I say heck you have no rights to ask someone to clean his room, when you are stinking.

Its just like saying dont set up small shops in a sparsely populated village. And forcing them to either open shopping malls or close the small shop.

We are at a stage where govt assumes they can command these companies, but its actually just the starting stage, if you try to take them on, you will be the looser.
Don't Hyundai/Maruti/TATA and others export from here? Yes, they do. So probably there's enough infrastructure to achieve this (can be better but works for others).

It's just business. If they don't setup shop, they pay more duty which goes to the government and helps us all (theoretically). If they setup shop, it creates jobs and again helps us (when you see the bigger picture). If they leave at a time when luxury car market is increasing, then they lose. Losing a manufacturer whose market share is probably less that 0.1% doesn't cause much loss to us.


Quote:
Originally Posted by xingamazon View Post
For those appreciating govt move, brace yourself to buy Ambassadors again. All the best.
Non-sense!
asr245 is offline   Reply With Quote
Old 10th March 2011, 12:02   #50
BHPian
 
Prithvi's Avatar
 
Join Date: May 2005
Location: BANGALORE
Posts: 301
Thanked: 21 Times
Thumbs down Re: Audi planning to exit India in the backdrop of recent budget proposals

One of these big companies should really walk out & the rest will follow. Its high time someone teaches this wonderful government a lesson. They were supposed to roll out GST by 1st April this year but have postponed it!

We are paying the highest rates for fuel, cars, food etc. And now they make imported CKD cars more expensive.

Mera Bharath Mahan!
Prithvi is offline   Reply With Quote
Old 10th March 2011, 12:10   #51
Senior - BHPian
 
Join Date: Oct 2009
Location: BANG-A-LURE.
Posts: 1,114
Thanked: 3,484 Times
Default Re: Audi planning to exit India in the backdrop of recent budget proposals

Quote:
Originally Posted by asr245 View Post
Don't Hyundai/Maruti/TATA and others export from here? Yes, they do. So probably there's enough infrastructure to achieve this (can be better but works for others).

Losing a manufacturer whose market share is probably less that 0.1% doesn't cause much loss to us.
Yes, Hyundai/Maruti/TATA exports cars from India but do you know what is the percentage.Its less than 10%.

Audi is no more a small player in the Indian luxury market.A small comparison below.

2010 sales

BMW-6426
Merc-5819
Audi-3003

Their share is not less than 20%.

Audi has been selling Luxury cars in India since 2004, however the Audi India was established in March 2007 as a division of Volkswagen Group Sales India.

Last edited by SILVERWOOD : 10th March 2011 at 12:14.
SILVERWOOD is online now   Reply With Quote
Old 10th March 2011, 12:10   #52
Senior - BHPian
 
Gansan's Avatar
 
Join Date: May 2009
Location: Chennai
Posts: 3,428
Thanked: 878 Times
Default Re: Audi planning to exit India in the backdrop of recent budget proposals

This is mere posturing and their bluff should be called. No mfr will walk out of the Indian market at this point of time.

Moreover, does anyone believe an additional 8 lacs or so is seriously going to bother a customer in the 60 - 80 lacs price bracket? There will hardly be any impact in their sales.
Gansan is offline   Reply With Quote
Old 10th March 2011, 12:16   #53
BHPian
 
vipul_singh's Avatar
 
Join Date: Sep 2005
Location: BLR / Lucknow
Posts: 406
Thanked: 230 Times
Default Re: Audi planning to exit India in the backdrop of recent budget proposals

While one can't disagree with what the Government move is intended to achieve, I completely disagree with with the way they have implemented the change

Remember the '90s, with smoke spewing cars and commercial vehicles on our streets? The Government took a decision that pollution levels had to come under control. But they gave a well published long term plan on how to do it, starting with India 2000 norms and moving to BS IV in 2010.

I am surprised why the Government cannot publish a similar long term (at least 4-5 years) evolution plan for CKD duty structure? Is it because they were under pressure from SIAM in case of pollution standards, but there is no 'mai-baap' (godfather) for the foreign companies in the latest case?

If the Government is so keen on making high-impact changes in one shot, let them implement strict vehicular crash saftey standards for cars and (especially) buses from April 1, and see how many Indian manufacturers survive!

Last edited by vipul_singh : 10th March 2011 at 12:20.
vipul_singh is offline   Reply With Quote
Old 10th March 2011, 12:16   #54
Team-BHP Support
 
Join Date: Feb 2004
Location: Bangalore
Posts: 11,894
Thanked: 9,745 Times
Default Re: Audi planning to exit India in the backdrop of recent budget proposals

Audi is sabre rattling here. Being the lowest volume player of the VAG group, the impact to the group is lower if they speak out first. Am sure there will be representation from all the "assemblers" and am sure some retaliation tactics will come into fore like

1: Our company will reduce sourcing from India
2: We will lobby the EEC to add tariffs on parts imported from India
3: 5 plants with be forced to close down with XXX job losses and YYY indirect job losses

and the clincher - instead of charging 60% X 20 lakhs X 10000 cars = Rs 1200 crores why not charge 2% on all imported content of all cars =

2% X 50000/ car X 3 million cars/ annum = Rs 3000 crores
ajmat is offline   Reply With Quote
Old 10th March 2011, 12:35   #55
Team-BHP Support
 
tsk1979's Avatar
 
Join Date: Feb 2005
Location: New Delhi
Posts: 22,955
Thanked: 15,648 Times
Default Re: Audi planning to exit India in the backdrop of recent budget proposals

Well Auto industry is a pampered lot. No other industry in India enjoys such duty protection.
Food for thought, what if developed nations decide to put similar tarriffs on Indian exports, for example IT?
tsk1979 is offline   Reply With Quote
Old 10th March 2011, 12:54   #56
BHPian
 
Join Date: Aug 2008
Location: Jamshedpur
Posts: 205
Thanked: 5 Times
Default Re: Audi planning to exit India in the backdrop of recent budget proposals

Quote:
Originally Posted by mayjay View Post
Oh no, poor little rich german brands facing high duties. About time something happened to shake things up. The duties for the ckd come to around 60 per cent? So what costs 15 lakh in the US (cheapest 3 series, also assuming us duty levels to be zero) should cost 24 lakh here. Which it does. Except for the fact that in the us this is a 3 liter engine, here it is a 2 liter one. Margins, margins!
If this forces these manufacturers to set up full fledged assembly / manufacturing plants here then it has to be a good thing. Whether it'll actually lead to reduction in prices is debatable, but hey, if it leads to new jobs in our country then it is great, right?
That is absolutely right and look at audi it is supposed to be cheaper than bmw and mercedes but is more expensive and morever they are just giving flase threating to the government.No company would leave India and we could have better manufacturing and now realistic prices.
ahuja365 is offline   Reply With Quote
Old 10th March 2011, 13:11   #57
Senior - BHPian
 
ghodlur's Avatar
 
Join Date: Sep 2009
Location: Thane
Posts: 5,041
Thanked: 2,086 Times
Red face Re: Audi planning to exit India in the backdrop of recent budget proposals

The outcry by the CKD importers as a result of the recent budget proposals has been not because a 60% customs duty has been slapped but because of the sudden steep hike in the % and the change in the definition. I guess the govt would not have taken the car manufacturers into confidence before announcing the same otherwise there would have been lobbying definitely for a gradual increase say from the present 10% to maybe 20% to the max but 6 fold increase is something which these car manufacturers could not digest.

Attached below is the quote from one of the websites detailing what would the increase in customs duty do just for reading purpose.So as seen from the quote below its not just Audi who is taking the brunt but all most all car manufacturers will be soon facing the heat and this is sure to boil into a major govt embarrasement.

Quote:
The proposal says automakers who import pre-assembled parts such as engines and transmissions will now need to pay 60 percent customs duty, as against 10 percent for CKD (completely knocked down) kits, like they were classified as so far.
The new definition in the budget proposal says that any unit containing a pre-assembled engine, gearbox or transmission mechanism as well as a body assembly on which a sub-assembly of assembled engine, gearbox or transmission is installed, is now classified as a semi-knocked down kit, and hence the higher duty. These were earlier called completely knocked down kits.
This has caused concerns on multiple levels across manufacturers, save for a handful who have completely indigenous models. The higher-end cars are the ones that will be hit badly, such as Mercedes, BMW, Skoda and Audi, who all import the components and assemble them here in local plants.
This is how a CKD operation functions.
CKD operations are about four times cheaper than setting up manufacturing plants in the country, and also involve less vendor development and quality control issues. Typically, with most carmakers, the engine and transmission are on the import list. This forms about 30 per cent of a carís cost.
So when a carmaker like Toyota for instance says that it has achieved 70 percent localization with a model like the Etios, it means that the entire body shell, wheels, interiors etc are made locally and the company has developed vendors for such items. But critical components such as engine and transmission are imported, which form the remaining 30 percent cost.
Letís do a quick back of the envelope calculation to see how this piece of legislation affects the price of the Etios for instance. The base version of the Toyota Etios is priced at Rs. 4.96 lakhs ex-showroom. Now, letís assume the engine and transmission cost 30 percent of the car, that would come to about Rs. 1,48,800 (assuming this is the cost including 10% CKD duty at present). Now, if these components were charged at 60% duty then the cost of these components alone would go up to Rs. 2,23,200.
This in turn would take the price of the base version of the Etios up to Rs. 5,70,400. At this price, the Etios would no longer be competitive, as compared to the Maruti Dzire or the Tata Manza, both of which have 90 to 95 percent localization.
Thatís just one of the problems carmakers face. According to an industry source, the reason the government is proposing this step is to encourage local manufacture of all components, which would help the government meet its goal of having manufacturing account for 25 percent of Indian GDP in the next 10 years, from the present 16 percent.
For carmakers this would mean having to make additional investments in the country to set up manufacturing processes to built all these components, as well as transfer technology from their foreign plants. An easier route would be to import all the parts to build these units (like an engine) and assemble it locally, but that too would require heavy investments in manpower and equipment.
The lobbying has already begun, with various automakers approaching the Society of Indian Automobile Manufacturers (SIAM) and seeking further clarification from the Finance Ministry. Across the board, most automakers will feel the impact of this proposal which we all missed initially in the 2011 Budget. Also read: 2011 Budget impact on auto industry
Some have their business plans getting directly affected. Harley Davidson, for instance, is setting up a CKD plant in Haryana to assemble its motorcycles locally, at lower prices. But this proposal will send prices higher again. Volkswagen, Hyundai and Ford are also to be hit. Other automakers like Tata Motors, Maruti and Mahindra have a mixed bag, with only some of their models facing a price increase.
Bajaj Auto, Indiaís second-largest two-wheeler maker, assembles the Kawasaki Ninja 250R in Pune, importing all its components. But it also plans to build KTM bikes in India, with a high degree of localization.
ghodlur is online now   Reply With Quote
Old 10th March 2011, 13:22   #58
Senior - BHPian
 
MaserQ's Avatar
 
Join Date: Oct 2006
Location: Bangalore
Posts: 1,156
Thanked: 51 Times
Default Re: Audi planning to exit India in the backdrop of recent budget proposals

Quote:
Originally Posted by mobike008 View Post
BMW has come down way too down with their X1 and I think thats the least they can come down to capture the market in a certain segment.

Audi, BMW and Mercedes depend a lot of brand value and target customers accordingly. They are definetly not in the mass game. Hence, a local manafacturing unit for them would be a distant dream as the volumes dont justify the huge investment.
True, they are not in the mass market game. At the moment, these marques sell a few thousand cars and then some, annually. That does not mean that they want to continue doing so a few years down the line, when the Indian Auto story gets bigger.

For a premium stand-alone brand like BMW, top line numbers are crucial for future growth and dare I say, survival. I would not be surprised if BMW were to manufacture front-wheel drive 'small' cars in India in the not too distant future, for domestic and export markets.

In more advanced markets, smaller cars from these marquee labels are seen as aspirational vehicles for young executives. The whole idea is to get them to buy into the brand early and keep them for life, ie, you start with a BMW 1-series and upgrade from the same brand family as you go on.

The Indian market might not have reached that stage yet, but that day will be upon us sooner than you think.


Quote:
Originally Posted by Gansan View Post
This is mere posturing and their bluff should be called. No mfr will walk out of the Indian market at this point of time.

Moreover, does anyone believe an additional 8 lacs or so is seriously going to bother a customer in the 60 - 80 lacs price bracket? There will hardly be any impact in their sales.
True, Audi are sending a strong message but they are going nowhere.

Try persuading a prospective buyer to cough up an extra 8 lacs even for a premium brand. Rest assured, it will not be an easy sell.

Quote:
Originally Posted by vipul_singh View Post
Remember the '90s, with smoke spewing cars and commercial vehicles on our streets? The Government took a decision that pollution levels had to come under control. But they gave a well published long term plan on how to do it, starting with India 2000 norms and moving to BS IV in 2010.

I am surprised why the Government cannot publish a similar long term (at least 4-5 years) evolution plan for CKD duty structure?
Spot on vipul. While the intention of the government is to spur local auto manufacturing, they seem to have no road map to aid and promote the same.

Instead, they seem to be relying on knee jerk reactions most of the time as represented in each annual budget. Why not come out with a 5-year plan/blueprint to promote not only local production but also transfer of technology to enable the same? It is a long shot, but...
MaserQ is offline   Reply With Quote
Old 10th March 2011, 13:51   #59
Team-BHP Support
 
benbsb29's Avatar
 
Join Date: Nov 2006
Location: Brisbane
Posts: 8,025
Thanked: 3,483 Times
Default Re: Audi planning to exit India in the backdrop of recent budget proposals

Quote:
Originally Posted by MaserQ View Post
Spot on vipul. While the intention of the government is to spur local auto manufacturing, they seem to have no road map to aid and promote the same.
Well said! While i agree Audi's threat is nothing but an eyewash, lets look at it from their angle as well. The government cannot just being about rdical changes in taxation without any form of prior intimation.

Even changes which are to come about thorugh the intimation of GST are known to an extent by financial consultants, so why was such a move not implemented in this case as well? You need to give someone time to adjust and plan and not spring a surprise all of a sudden, especially when it comes to a topic like taxation.
benbsb29 is online now   Reply With Quote
Old 10th March 2011, 14:14   #60
Senior - BHPian
 
asr245's Avatar
 
Join Date: Dec 2007
Location: Gurgaon
Posts: 1,135
Thanked: 360 Times
Default Re: Audi planning to exit India in the backdrop of recent budget proposals

Quote:
Originally Posted by SILVERWOOD View Post
BMW-6426
Merc-5819
Audi-3003

Their share is not less than 20%.
I don't get this. Maruti's annual sales are at 1M+. Assuming even half a million from the rest of them, annual sales at present much be more than 1.5M. The above 3 combined are at less than 20K. Ok so it's not 0.1% but about 1% combined.

BTW, why can't they actually CKD for the engine, gear-box and transmission and assemble it here? They don't really need to source local components to avoid compromises in quality. Sure they will have to invest a lot more than they had probably planned to and that's why they are crying hoarse.

Last edited by asr245 : 10th March 2011 at 14:19.
asr245 is offline   Reply With Quote
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search


Similar Threads
Thread Thread Starter Forum Replies Last Post
Audi planning SQ5 for India? _raVan_ The Indian Car Scene 3 20th February 2014 13:45
My recent visit to India (Delhi) redcandle Super-Cars & Imports in India 34 26th December 2007 12:03
My recent visit to India (Delhi) - Interesting Encounters redcandle Street Experiences 22 21st November 2007 19:17


All times are GMT +5.5. The time now is 11:43.

Copyright ©2000 - 2017, Team-BHP.com
Proudly powered by E2E Networks