[pqr]

Mercedes Benz India launched its first battery-electric-vehicle (BEV) SUV EQC in October 2020, at an ex-showroom price of ₹ 99,30,000. Mercedes Benz then increased the price of EQC by 5% and 3%, respectively, in January 2021 and July 2021. However, since January 2022, Mercedes Benz is selling EQC at a discounted price of ₹ 99,50,000.





Since the EQC launch, direct competition also introduced their own BEV SUV in India at a similar price point with similar or better performance.



Mercedes Benz or for that matter any other luxury carmaker in India does not disclose actual sales figures, so, it is not apparent how the luxury BEV market is really doing. But what is clear, in the BEV category nobody has an early mover advantage. Automaker which brings the best product at the right price will take the cake, irrespective of timing, as the market is still in a nascent stage.

EQC or GLC Coupe AMG

Customers looking for a performance oriented SUV still have a good choice in the form of the GLC coupe AMG with a petrol engine. Both offer similar in-cabin space and similar performance. EQC though has better on paper power and torque output, but has a weight disadvantage, hence similar on road performance. Moreover, customers can enjoy petrol powered cars all time without the hassle of range anxiety or time required to charge such a big battery, also save 10% on the on-road price.



Way forward

What could really change the game is the CKD assembly operation of EQC or for that matter any imported BEV.

Let us have a look at the below illustration of price de-construction. Imported CBU cars with CIF (Cost, Insurance, and Freight) value higher than $ 40,000 attract an import duty of 100%, whereas CKD operation brings down the effective duty to a mere 15%. Also, BEV enjoys a lower GST rate of 5%.



Higher import duty has scared Tesla from selling BEV in India for now. And their past lobbying activity could not yield favorable results.



However, Government stand to not to reduce CBU import duty on BEV seems to be right, as higher duty acts as a tariff barrier and favor local manufacturing – which in turn generates employment and asset creation in India. India has been 5th largest PV market, and local production can have economies of scale. Though luxury segment is small, and it does not need any tax cuts as it is deemed as symbol of conspicuous consumption.

So, if Mercedes Benz India decides to bring EQC as CKD in India, lower custom duty on CKD operation coupled with lower GST rate of 5% on BEV, will make it more appealing than other vehicles, as illustrated below.



Someone has to break - chicken first (market demand) or egg first (product) - conundrum, similar to what Tata or MG did in the mass market BEV category. In fact, as per Mercedes Benz India press announcement, they are trying to bring purpose-built BEV EQS as CKD in Q4 of 2022.

[Turbanator]

Originally Posted by pqr

Let us have a look at the below illustration of price de-construction. Imported CBU cars with CIF (Cost, Insurance, and Freight) value higher than $ 40,000 attract an import duty of 100%, whereas CKD operation brings down the effective duty to a mere 15%.

MB India, like other EU luxury carmakers, gets such cars at less than $40K and thus pays 60% customs duties. They transfer from the mother plant to Indian operations at close to costs. That's the reason, you can add only a few loadings in the cars like Macan, X6 and previously Boxter range.

Also, to qualify for 15% duty, the level of indigenisation is very high. There's a long list of what all needs to be done locally before you qualify. Usually, on CKD, 25% is paid.

However, Government stand to not to reduce CBU import duty on BEV seems to be right, as higher duty acts as a tariff barrier and favor local manufacturing – which in turn generates employment and asset creation in India.

That's correct but why in the luxury segment? Even after 15 years, the most premium EU manufacturers do is ship the engines in unassembled form and do a vehicle assembly, rather than putting up a plant, not even one model is built for export.

I have doubts that companies like Tesla will spend Billions on a plant to save on duties and then sell what 1-2K units per month. But everyone is happy that such luxurious cars are only for rich people and do not affect the common man, which I find it frustrating. Why can't a common man buy something premium?

If Tesla or any other EV manufacturer had gotten relief for a few years/ number of vehicles, what difference it would have made to the exchequer? It's not as if they are going to come in any case, with zero or 100% duties.

It's a hypothetical loss of taxes as no sane manufacturer is going to invest in a plant until the volumes buildup.

[samm]

Bringing companies like Tesla will help accelerate the EV adoption, and they will bring in huge infrastructure to support their cars which will be helpful to other manufacturers also.
I hope government will act sensibly.

[drjaygoyal]

Originally Posted by samm

Bringing companies like Tesla will help accelerate the EV adoption, and they will bring in huge infrastructure to support their cars which will be helpful to other manufacturers also.
I hope government will act sensibly.

I am NOT in favour of giving a free ride to Tesla or any other company.

Govt’s approach is bang on ! Make in India and enjoy lower taxes. Don’t make in the world and dump in India. A fair market is a successful market.

[Sivacar]

During the launch in 2020. The EQC was offered with the following package for 5 years and unlimited kms.

Service package (including brake pads and disc)
Warranty and Road Side Assistance

Post the price reduction the package term was reduced to 3 years and brake pads & discs were removed from service package.

Essentially what Mercedes has done is, by adjusting/reducing the terms of the service package, they were able to reduce the price.

There is no discount as such

[Lobogris]

Originally Posted by samm

Bringing companies like Tesla will help accelerate the EV adoption, and they will bring in huge infrastructure to support their cars which will be helpful to other manufacturers also.
I hope government will act sensibly.

No, they won't. Tesla would sell less than 2k cars per year in India. Take a look at sales of established luxury brands like Mercedes or BMW in India. There might be an initial spurt of 5 to 10k due to hype and pent up demand but the sales would taper off after that. There is no way Tesla would invest in anything for such small volumes. You might see a few dozen chargers installed across India by them and most would be small locations with 2 or 3 chargers. Very few, if any, would be 250 plus Watts superchargers.