Audi planning to exit India in the backdrop of recent budget proposals

[ghodlur]

Its learnt that Audi is planning to leave India operations int he event of budget propsal to impose additional duty on completely knocked down (CKD) kit imports. As much as 60% custom duty would be applicable on the CKD units which now will be considered as completely built units.

More details in the link.

May even leave India if CKD duty is not rolled back: Audi - Moneycontrol.com -

[jkdas]

Eh? Exiting India now? It would be the best way to kill their reputation IMHO as they have a huge customer base now and where will all these people for for service (for eg) ?

[v&v]

Audi gets chunk of revenue from Asian countries and India in particular, where every car manufacture is trying get into India, Audi's current stand is just a gimmick. Indian market is too lucrative for automotive sector to ignore it.

[TOR]

The government should stand by the decision on the import duties. If these companies are really serious about their 'India commitment' then they should set up factories for local manufacture of the cars they want to sell here.

This rule change might well be to counter the effect that China is having on the region, with most of these companies having manufacturing bases there.

[DieselAddikt]

Audi or any other German manufacturer will find it hard to exit our country. The market for their cars in India generate a good revenue for them. No business group would want to do this.

[ghodlur]

To set up factories for local manufacture for the high end luxury cars will involve a huge capital and I dont think so Audi would find that proposition feasible for the simple reason that the sales figures for these CKD unit models do not justify the capital required to set up the factories. Even if they do then you may see only mass market models manufactured esp for the Indian market.

Audi knows that there is market in India for their products and till now they were milkiing the Indian customer with their high priced models. The budget proposal to charge custom duty would be the last nail in the coffin for the Indian consumer since the affordabililty would be much more less in the coming days.

[raul]

This move is most likely from manufacturers who have set up base here who have got affected or expect to get by CKD pricing mostly from BMW.

There are differences between cbu and ckd precisely to encourage the ckd route for to the luxury and super luxury segment where volumes may not justify the huge manufacturing investments. This policy is debatable but it has its merits.

But Audi definitely has to make investments in the country event for ckd, whether volumes can justify a manufacturing plant is their decision and depends on factors like demand over the next 5-10 years and their pricing strategy.

Audi's response in the press is petulant and unlikely to win it any fans. These things have to be worked out internally. Audi leaving India is not going to affect anyone but themselves, they are not providing an essential service and there are here for business not charity. If they had a manufacturing plant and a large labour force then it would be different.

[navpreet318]

I really hope they remain true to their word and really exit India.And also i hope the European countries impose heavy duties on Indian products.They would be a major wakeup call for the indian govt. its been too long they have harboured the vested interests on indian company bosses under its developing country theme.Its time to become equal to the other major countries of the world and have a market equal to them.This would lead to better production and better competition to the lax indian manufacturers.They will have to gear up and meet the norms used worldwide.

I just hope this happens.

[CrAzY dRiVeR]

Originally Posted by TOR

If these companies are really serious about their 'India commitment' then they should set up factories for local manufacture of the cars they want to sell here.

For small car manufacturers, this is 100 percent true. But not in the case of high end luxury car makers, whose sales figures dont justify the huge investsments that need to be made.

Not to mention the ridiculously high taxes on imports! I understand the need to protect the Indian manufacturers, but such a high level of taxation is simply not justified.

[issigonis]

>>>

I find the report in CNBC TV-18 extremely hard to digest.

India is one of the fastest growth markets for automobiles across all market segments , including the premium segment currently serviced by the four teutons ( Daimler, BMW, Audi, possibly Porsche too) along with JLR.

Keeping aside the super premium segment aside (serviced by Aston Martin, Bentley, Ferrari, Lamborghini, Maserati, Rolls Royce, Maybach et. al) which have far lower uptake, the premium segment serves as :

1. the bridgehead for a high profile, long term strategy for market penetration (and not market skimming)

2. educates the target market segment(s) of the range of offerings, especially if large volumes are to be sold by products lower down the range in the years to come (in the case of Audi it will be its mainstream sister brand VW)

Audi are, to my mind at stage #1 as above. It does not make sense for them to consider withdrawing now, or at any time later.

Please remember that in the coming thirty odd years more cars will be sold than all the cars sold till now, since the birth of the automobile industry, way back in the nineteenth century. This breathtaking growth rate will be driven by the emerging economies, in which India is an important entity.

The report reflects a game of shadow boxing probably, a game played out between various auto majors and the associations, each with an axe to grind.

As I said earlier, I suspect this is part of the complicated (and convoluted) negotiations leading up to the FTA ( Free Trade Agreement) between EU and India. Moreover, India will have to be mindful of the fact that we do not lose out big time to China (in manufacturing capabilities et.al).

Regards, drive safe

[amitoj]

Only time will tell whether it is an empty threat or a real warning.
Question is, whether other companies will also follow suit. Another major company that is affected by this CKD duty is Toyota. I read somewhere that even their Etios will come under this duty now. Will their models make sense to the price conscious Indian market?

[asr245]

I don't think they are planning to leave. They are only thinking about not expanding which makes sense if the proposed duty structure is imposed. They can't leave as that will leave present customers helpless and their brand will be diminished for a long long time.

PS: wonder if this has got anything to do with our environment minister's rant about luxury cars?

[TOR]

Originally Posted by CrAzY dRiVeR

For small car manufacturers, this is 100 percent true. But not in the case of high end luxury car makers, whose sales figures dont justify the huge investsments that need to be made.

The Indian Governments idea would be to make India a hub for these European car makers for Export to the region( as is happening in China).

The concern is not the 'volumes in India' but the place of India as a manufacturing hub and industrial power in the region.

This could well be a case of economic strategy rather than helping the Indian mass market car makers.

[sgiitk]

Are not Audi, VW and Skoda part of the same stable? if so then setting up local manufacturing may not be such a big deal.

[ghodlur]

Originally Posted by sgiitk

Are not Audi, VW and Skoda part of the same stable? if so then setting up local manufacturing may not be such a big deal.

VW and Skoda have been producing mass market products whereas Audi targets only the Class market where the sales figures are not that eye popping. can you imagine Audi or Merc or BMW introducing an affordable hatch for the Indian market in the 4-6L rupees range. Thats highly impossible.