Team-BHP > The Indian Car Scene


Reply
 
Thread Tools Search this Thread
Old 18th September 2018, 14:29   #106
Senior - BHPian
 
Join Date: Apr 2010
Location: EU - Nordic
Posts: 1,868
Thanked: 2,057 Times
Default Re: Taxes on cars worldwide

Quote:
Originally Posted by aniyo View Post
Do we actually know how much taxes are levied on cars in USA, Europe and Australia?
Here is an example from Finland:

Overpriced cars : Myth or reality?-finland_car_tax.jpg

Autoveroton SVH€ = Car base price, including 24% VAT
Arvioitu Autovero€ = Car tax, based on CO2 emission.
Arvioitu Autoverollinen SVH€ = On-road price

Vero €/vousi Perusvero = Annual tax, based on CO2 emission
Vero €/vousi Käyttovöima = Annual tax, based on fuel. Petrol-powered vehicles are exempt.

So, for eg:, the Karoq 1.6TDI DSG Exclusive has base price of 33320€ including 24% VAT. This puts the manufacturer's price at about 26870€. The final on-road price for the car is €42493, which means about 58% tax has been added to the manufacturer's price when you take delivery of the car.

Last edited by StarrySky : 18th September 2018 at 14:36.
StarrySky is offline   (2) Thanks
Old 18th September 2018, 15:45   #107
BHPian
 
aniyo's Avatar
 
Join Date: Nov 2015
Location: Bangalore
Posts: 527
Thanked: 1,437 Times
Default Re: Taxes on cars worldwide

Quote:
Originally Posted by StarrySky View Post
. The final on-road price for the car is €42493, which means about 58% tax has been added to the manufacturer's price when you take delivery of the car.
This is pretty much the taxes on Indian cars of the same size, exception being Karnataka which has crazy taxes.

The per capita income of Finland on the basis of PPP is $42,000 and that of India is $6500, so the same car priced similarly will always seem expensive in India vis-a-vis European countries. Manufacturing in India will give a cost advantage but the pricing can be lowered by at most 15-20% which is still high for the Indian income. No wonder our country loves Maruti and the likes.

For reference per capita income of China is $15,500 so car manufacturers have a better market there.

I was seeing taxes in many countries include 15-20% VAT and CO2 tax. This applied to India will get the prices down by a good margin.

Last edited by aniyo : 18th September 2018 at 15:50.
aniyo is offline  
Old 18th September 2018, 20:39   #108
BHPian
 
Join Date: Sep 2018
Location: Chennai
Posts: 34
Thanked: 56 Times
Default Re: Overpriced cars : Myth or reality?

Quote:
Originally Posted by venkyhere View Post
the 52% is for the "goods" and the 18% for using road "service" for the "lifetime" of the vehicle; plus tax on fuel, plus toll charges on top of road tax - all paid from already taxed money. In terms of the common man getting his money squeezed out of him, india has a structure similar to developed countries, however, in terms of offering infrastructure back to him (road surface, pothole filling, public toilets, unscheduled road digging without arranging alternate routes, covering up roadworks with dug up mud and deciding its ok to not re-tar it etc etc) india is as disorganized and unruly as underdeveloped countries.
That's a huge 100 percentage tax, including direct and indirect taxes! Also factor in the taxes you pay for petrol, that shall be another massive amount. Maybe government wants people to use public transport more than driving a car and cribbing about taxes but in my perception right to movement shouldn't be curtailed by burdening a common man. I also hope decreasing the tax would enable manufacturers to give better quality and safe products in India.
And your comments are cent percent true with regards to road infrastructure, even a busy road having IT companies is just so poor that many two wheeler riders fall occassionally! Maybe not all metros are so but Chennai interior roads are too bad!
vDragon3 is offline  
Old 18th September 2018, 23:29   #109
Distinguished - BHPian
 
Hayek's Avatar
 
Join Date: Jul 2011
Location: Bombay
Posts: 1,316
Thanked: 7,724 Times
Default Re: Overpriced cars : Myth or reality?

When I look at the taxation system on cars in India, I see some parts that make sense and some that are completely nutty.

What are the objectives of a taxation system:
1) Raising revenue for the exchequer
2) Discouraging use of goods with negative externalities
3) Promoting public policy objectives such as “Make in India”
4) Minimizing economic distortions and inefficiencies

What are the taxes we must consider for this purpose:
1) Customs Duties
2) GST
3) One Time Road Tax

Does our tax system meet these objectives? I dare say no. Why?

To raise funds for the exchequer with minimal distortion to the economy, the simplest method is a flat tax - applicable at one rate to all goods and services, or at least to all goods of a category.

Instead, we have 5 different rates of GST on cars - ranging from 29% to 53% - which creates the strange automotive ecosystem we see - with ugly products like the sub 4 metre sedans which one does not see anywhere else in the world. This is clearly inefficient - most sedan buyers would have gone for a normal sedan if it were taxed at the same rate as the sub 4 m monstrosities. The massive tax differential of 16% between a sub 4 m sedan and a normal one has led to a clear wastage of resources in developing India specific products, burdens Indian customers with higher costs as the cost of these products has to be amortised over only Indian volumes and is bad from a customer welfare perspective as people don’t get the product they want without paying a massive 12.5% premium for the same.

For penalising demerit goods, one must look at the negative externalities cars introduce - which I look at in 2 categories - pollution and the need for public parking space. Yes, there is a value in promoting more fuel efficient or less polluting products. But there are far superior ways of doing that (esp raising taxes on fuels and having taxes linked to measured CO2 and Particulate emissions) to the present dumb system of 4 m + <1200 cc engine size. As for public parking space, one could have differential parking charges for road side parking based on car length - instead of encouraging “small” cars through a GST incentive for smaller cars. So where should the GST rate have ended up? My suggestion would be a base rate of 28% (sticking to the current level) + a cess based on CO2 / KM + a cess based on particulate emissions / KM - with perhaps 3 slabs of 4% each for each of the above (getting to a top rate of 52% like in the current system). This would automatically encourage electric cars (which would get just a 28% tax rate) and hybrids, but wipe out the dumb sub 4 m sedan.

The GOI thinks it is promoting Make in India through its 60-100% customs duty. But all that this duty does is create a massive profit island for Suzuki - and make the ability of new entrants to compete close to zero. Such a massive domestic profit island in fact discourages manufacturing for exports - why would someone produce in India and sell abroad when they would realise between 33% and 50% less by doing so? This duty also leads to setting up wasteful kit assembly operations such as Skoda in Aurangabad, and prevents anyone from considering scale manufacturing of large cars in India. And in a Trumpian world, it may lead to other countries imposing retaliatory tariffs or non tariff barriers on our exports (such as Pharma, Textiles and IT services). How do we promote Make in India? Destroy the domestic profit island by bringing customs duties on cars down to 15-20%. Eliminate the distortionary GST structure due to which we make cars that have no demand anywhere else in the world. And align our safety and emissions standards with the developed world - so that a car made for India can be sold anywhere else in the world with next to no modification. If we do that, India would become the small car manufacturing hub of the world.

So my suggested central taxation system would be:

1) Customs Duty of 10-20%
2) GST of 28-52% similar to what we have but based on emissions - not length or engine size

Moving on to road tax, I do think high road taxes are fair, especially in congested cities. But introducing electronic road pricing is a far better way to do that than the current system. And the GSTN + RFID registration plates can be used to allow sharing of road taxes between states based on where a car is used rather than on where it is purchased. So lower OTT, share OTT between states through GSTN + RFID and levy electronic tolls both on highways and in congested city centres.

Finally, allow individual imports of new cars.

With these changes, the phenomenon of over priced made for India cars will end - but I am willing to bet India’s net trade surplus in cars will rise.
Hayek is online now   (2) Thanks
Old 13th February 2019, 18:07   #110
Senior - BHPian
 
arjab's Avatar
 
Join Date: Feb 2005
Location: MAA/CCU
Posts: 1,012
Thanked: 2,882 Times
Default Are we really getting value for money when we buy new cars now?

In 2005, I bought the first generation SWIFT, the top end variant, Zxi. I paid a grand total of approximately Rs 5.6 lakhs on road, Kolkata.
The car came in a pretty natty shade of - what the company brochure said - "Bright Red" and by virtue of the fact that it looked like nothing else on the road, at that point of time, curious glances and sometimes appreciative glances were more often than not witnessed at traffic lights and mall parking lots.

The car was well kitted out as well. It had:
- Electric power steering
- All four power windows (with one touch driver side op)
- Fully Automatic Climate Control
- Digital Clock with outside ambient temperature readout
- Anti Lock Braking System
- Twin Airbags (Driver and co-driver)
- Height adjustable driver's seat
- Height adjustable front safety belts
- Rear wash / wipe
- Rear foglight
- Rear de-mister
- Alloy wheels shod with 185/70 R14 tubeless radials
- the spare wheel also is an alloy
- Tinted glasses all round
- Day night interior rear view mirror
- Integrated music system in dash
- Electrically adjustable wing mirrors
- Rake adjustable steering wheel
- Electric release for rear hatch door
- Central Locking (all 5 doors + bonnet)
- A cracker of a 1.3L all aluminium, 16 valve petrol engine with a fantastic top end
- Large, commodious front seats (which i still feel is the best after all these years)
- All the seats, front and rear, come with their individual adjustable head restraints
- All fabric upholstery
- All back interior theme (what the Ad-kids now call "sporty")
- Healthy NVH suppression material. Dash insulation, firewall insulation even under bonnet insulation
- Full wheel well cladding on all 4 wheel wells.
- Torsion beam rear suspension setup with stabiliser bar (the reason why the first gen Swift is still such a cracker of a drive)
- Front fog lights
- Euro NCAP 4 star rating for adult occupant protection, 3 stars for child protection and 3 stars for pedestrian protection ( all ratings as per then prevailing crash norms, but I think the Offset Deformable Barrier test remained then as well)
Link: https://www.euroncap.com/en/results/suzuki/swift/15683
- As per the "kitna deti hain" angle, even after 14 years and 135,000 kms later, she still returns 12kms per litre in the chaos of Kolkata traffic. Glugs a litre of unleaded every 16.5 kms on the highway
and till now has not let me down even once, anywhere , anytime , any place.

Fast forward to 2018:
- The new 3rd gen Swift costs an eye popping Rs 8.5 lacs on road Kolkata.
- Has almost the same feature set when compared to the top end manual petrol of 2005 vs top end manual petrol of today
- Plus points of 2018 model are:
LED headlights, bigger boot, infotainment system in keeping with the times.
Rest are similar, if not a notch down on its grandfather: for example: no stabiliser bar in rear suspension setup, a weirdly calibrated "woolly" feeling helm, maybe stylish but tacky interior plastics, a crash rating which is debatable and a curiously "detached" driving feel.

My question is: in 14 years, even accounting for currency depreciation and a myriad other economic parameters, aren't we paying a bit much for this tin pot?

Maruti has achieved tremendous economies of scale.
Most parts are shared between its various models, so fiendishly competitive sourcing prices are guaranteed to keep part price fluctuations to a minimum.

Even stuff like ABS, Airbags et al, which were treated like "exotic" stuff a decade and a half back are common now and unit prices would definitely be lower, than what it was 15 years back.

Steel prices too are not that harder than what it was earlier.

Yes, maybe the electronic content has risen, but how costly will it be? Keeping in mind that even entry level vehicles, such as KWID , are nowadays sporting touchscreens as well.
When Tata can provide a better performing system in the Tiago at a much lower price point, then one can half assume that the new Swift's audio bits are more or less along the same cost level, if not lower.

So, what is it that is causing OEM's to resort to this "creeping increments" to their best seller's prices?
Are there genuine reasons ? Or just unit profitability?

Love to hear from you folks!

And in the meantime , I've decided to keep my old Swift. I'm not losing anything at all.
arjab is online now   (22) Thanks
Old 13th February 2019, 18:31   #111
BHPian
 
Join Date: Jan 2012
Location: NCR / KOL
Posts: 980
Thanked: 1,445 Times
Default Re: Are we really getting value for money when we buy new cars now?

Did a quick check on the internet on an inflation calculator and saw 5.6L in 2005 has the same value as 14.94L today. The inflation rate in India between 2005 and today has been 167.04%. The average inflation they are calculated between 2005 and now is 7.25%, which I think is around the same reality. So I guess you are getting a more value for the price you are paying.

Economists in the forum I guess can shed more light.

Last edited by Altocumulus : 13th February 2019 at 18:37.
Altocumulus is online now   (11) Thanks
Old 13th February 2019, 18:42   #112
Distinguished - BHPian
 
SS-Traveller's Avatar
 
Join Date: Jan 2009
Location: New Delhi
Posts: 7,454
Thanked: 18,566 Times
Default Re: Are we really getting value for money when we buy new cars now?

Quote:
Originally Posted by arjab View Post
In 2005...
The car was well kitted out as well. It had:
- Digital Clock with outside ambient temperature readout
The 2005 model did not have this.
Quote:
Originally Posted by arjab View Post
- Height adjustable front safety belts
Nor this.
Quote:
Originally Posted by arjab View Post
- Integrated music system in dash
No. Just the 2-DIN slot.
Quote:
Originally Posted by arjab View Post
- Electrically adjustable wing mirrors
- Rake adjustable steering wheel
Neither of these features was there.
Quote:
Originally Posted by arjab View Post
- Euro NCAP 4 star rating for adult occupant protection, 3 stars for child protection and 3 stars for pedestrian protection ( all ratings as per then prevailing crash norms, but I think the Offset Deformable Barrier test remained then as well)
This only applied to Swifts equipped with 6 airbags. The version for India was never tested.
Quote:
Originally Posted by arjab View Post
- As per the "kitna deti hain" angle, even after 14 years and 135,000 kms later, she still returns 12kms per litre in the chaos of Kolkata traffic. Glugs a litre of unleaded every 16.5 kms on the highway
and till now has not let me down even once, anywhere , anytime , any place.
It certainly was reliable. I miss mine already.
Quote:
Originally Posted by arjab View Post
Fast forward to 2018:
- Plus points of 2018 model are:
LED headlights, bigger boot, infotainment system in keeping with the times.
Rest are similar, if not a notch down on its grandfather: for example: no stabiliser bar in rear suspension setup, a weirdly calibrated "woolly" feeling helm, maybe stylish but tacky interior plastics, a crash rating which is debatable and a curiously "detached" driving feel.

My question is: in 14 years, even accounting for currency depreciation and a myriad other economic parameters, aren't we paying a bit much for this tin pot?
You forgot the extra chrome and a fancier remote key!
Quote:
Originally Posted by arjab View Post
Maruti has achieved tremendous economies of scale.
...
So, what is it that is causing OEM's to resort to this "creeping increments" to their best seller's prices?
Are there genuine reasons ? Or just unit profitability?
Love to hear from you folks!
Wouldn't you rather just wear sunscreen? Listen to Baz Luhrman, memorize his lyrics, and you'll never again write a thread like this. The significant part of that song says:
Accept certain inalienable truths
prices will rise
politicians will philander
you too will get old, and when you do you'll fantasize that when you were young
prices were reasonable
politicians were noble
and children respected their elders.


Quote:
Originally Posted by arjab View Post
And in the meantime , I've decided to keep my old Swift. I'm not losing anything at all.
That'll depend on how long the government will let you keep it, depending on the city you choose to keep it in. Here's the story of our last journey in our Swift ZXi, and thankfully it is being looked after well by another enthusiastic BHPian.

Last edited by SS-Traveller : 13th February 2019 at 18:46. Reason: Typos
SS-Traveller is offline   (16) Thanks
Old 13th February 2019, 18:57   #113
Senior - BHPian
 
Join Date: May 2010
Location: Bangalore
Posts: 1,080
Thanked: 3,942 Times
Default Re: Are we really getting value for money when we buy new cars now?

Well, speaking as a new Swift owner, I'd say no. I don't think the car is worth the on-road price, or rather Maruti could have done a better job for what they're charging for the car. I mean, we're really enjoying the car and it's doing the job great, no complaints, but I do think it's overpriced, especially considering the lack of a decent safety rating.

But there's an old saying that the price is whatever the market will pay for it/will bear. And the sales figures for the car indicate that the market is willing to pay what they're charging for it.
am1m is offline   (2) Thanks
Old 13th February 2019, 19:45   #114
Team-BHP Support
 
SmartCat's Avatar
 
Join Date: Jun 2007
Location: Bangalore
Posts: 5,227
Thanked: 28,700 Times
Default Re: Are we really getting value for money when we buy new cars now?

Quote:
Originally Posted by Altocumulus View Post
Did a quick check on the internet on an inflation calculator and saw 5.6L in 2005 has the same value as 14.94L today. The inflation rate in India between 2005 and today has been 167.04%. The average inflation they are calculated between 2005 and now is 7.25%, which I think is around the same reality. So I guess you are getting a more value for the price you are paying.
Yes, what we are seeing is just normal inflation. We can arrive at the same conclusion by looking at Maruti's financials. 12 years ago, they had an operating profit margin of 15%. In FY18, they had an operating profit margin of 14%.

I'm pretty sure numbers are similar for other consumer products like Surf Excel, Parachute coconut oil etc too. Only, we don't notice it much because we pay Rs. 150 now instead of Rs. 75 ten years back.

Only consumer electronics (TV, smartphones etc) see a fall in prices over the long term. That's why companies in this space have to constantly innovate and bring exciting new products. Else, they margins will shrink rapidly.
SmartCat is offline   (8) Thanks
Old 13th February 2019, 20:13   #115
Distinguished - BHPian
 
Join Date: Aug 2014
Location: Delhi-NCR
Posts: 2,853
Thanked: 31,391 Times
Default Re: Are we really getting value for money when we buy new cars now?

Not only are cars cheaper today after adjusting for inflation they also pack a lot more. My Maruti 800 of 1985 cost Rs 56,000 then - like Rs 5 lakhs today give or take a little. While it was a status symbol back then it had none of the features we take for granted - no AC, no music, no auto window operation and so many more features. Compare that with what you can buy for Rs 5 lakhs today. Today we get more car for every rupee we spend.
V.Narayan is offline   (7) Thanks
Old 13th February 2019, 21:49   #116
BANNED
 
Join Date: Mar 2017
Location: Kolkata
Posts: 524
Thanked: 1,536 Times
Default Re: Are we really getting value for money when we buy new cars now?

Maruti has increased its prices and removed a lot of features from its mid range variants. It's bit hard to compare with Swift DVi coming without fog lamps and introduction of newer ZDi/ZXi plus.

Secondly talking about Swift, one must consider the development cost factor also. How is Maruti recovering that. Mainly how far into future they have distributed that.

Leaving Maruti a side. Let's talk about other cars to argue this point. I feel indeed I have got a real value for money deal. Even looking back at past also.

Ford Aspire TDCi top model at Rs. 8.5L on road Kolkata. This economy may feel even better for some one who has got a Figo Sports.

The entry level prices or deal didn't change much but mid range is offering excellent value for money compare to past. The biggest pointer to this is the market shift from best selling Alto to best selling Swift/DZire. Not just us, common man look for value for money deal, & they keep it way above any other priorities for a car.

Hopefully this new safety rule will shake up the market for better economical deals in entry level too.
NaXal is offline  
Old 13th February 2019, 22:26   #117
Senior - BHPian
 
Durango Dude's Avatar
 
Join Date: Mar 2009
Location: Chennai
Posts: 1,574
Thanked: 3,135 Times
Default Re: Are we really getting value for money when we buy new cars now?

Value for money is a relative term; that is if your income has grown exponentially with the times, then it's VFM, if not it isn't. If your income beats inflation and grows by leap and bounds then it's VFM, if not it isn't.
That said buying a German has become common place these days and is a matter of pride that one announces that he or she has arrived.
Durango Dude is offline   (3) Thanks
Old 13th February 2019, 22:41   #118
BHPian
 
Mu009's Avatar
 
Join Date: Mar 2018
Location: Jabalpur
Posts: 468
Thanked: 1,071 Times
Default Re: Are we really getting value for money when we buy new cars now?

Others have already expressed views that mine are a subset of.

Allow me to add a bit of info by sharing the perspectives of a wiser man on an intimately related topic.

All his points tie in relevantly with how and why mainstream cars (hell, most cars other than exotics that won't hold their value, I'd say) are only getting more and more VFM.

Mu009 is offline   (1) Thanks
Old 13th February 2019, 22:49   #119
BHPian
 
Join Date: Feb 2014
Location: bangalore
Posts: 108
Thanked: 59 Times
Default Re: Are we really getting value for money when we buy new cars now?

Hello, I have a question --- in the US Toyota Camry XLE model costed $30000 around 2010 - 2011 year. Now also it retails at the same price. I would like to understand if there is no inflation in US or how is it that Toyota is able to keep the prices unchanged over such a long duration. I am sure the equipment list has increased over the last few years for the XLE model
nikhil_pon is offline   (1) Thanks
Old 13th February 2019, 23:26   #120
Distinguished - BHPian
 
Rajeevraj's Avatar
 
Join Date: Aug 2011
Location: Bangalore
Posts: 4,017
Thanked: 12,598 Times
Default Re: Are we really getting value for money when we buy new cars now?

I think if you are looking at the pure purchasing power, then definitely current cars are value for money. If they were not, then we would not have seen such a huge increase in the number of cars on the road.

I also recall seeing a thread that showed how the entry level segment is declining and how the premium hatch segment and compact SUV's are showing the maximum growth. This indicates that affordability has gone up and people do not mind paying.

Whether the cars are actually worth the money they command, I personally think not. There is no doubt that the prices have gone up significantly and you need to pay much more money to get essentially the same car that was sold few years back. There are face-lifts, special editions, discounted editions etc. But the core mechanical hardly change.

A pre-owned buy will always be the ideally approach to keep oneself balanced.
Rajeevraj is offline  
Reply

Most Viewed
Thread Tools Search this Thread
Search this Thread:

Advanced Search

Copyright ©2000 - 2021, Team-BHP.com
Proudly powered by E2E Networks