[TusharK]

JLR India is planning to assemble the Defender SUV in India. The move to CKD assembly is expected to reduce its price significantly, thus making it more competitive in the Indian luxury SUV space.



Richard Molyneux, Chief Financial Officer at JLR, said, “Most of our models are locally assembled in India at the Pune plant. For the Defender, plans are in process to assemble the cars locally. We want to tap demand from ultra-high-net-worth individuals in the upcoming years and grow presence in the Indian market.”

The Defender could see a price drop of over Rs 20 lakh

The Defender is priced in the range of Rs 1.05 crore to Rs 2.79 crore. Reports suggest that the CKD version is likely to cost over Rs 20 lakh less, making it an ideal alternative to other sub-Rs 1 crore premium SUVs.

JLR India also stands to benefit from the Free Trade Agreement (FTA) that was recently announced between the UK and India. Under this agreement, import tariffs on CBUs will drop from 110% to just 10%.

Currently, the Defender is manufactured at JLR’s Nitra facility in Slovakia. India charges an import duty of 16.5% on CKD units under the old policy (pre-FTA).

Source: Live Mint

Link to Team-BHP News

[Dibyendu Bose]

I am not clear on one thing. If a CBU unit is drawing only 10% taxes, what incentive does a company have to manufacture the same domestically? Does it make sense to lose the scale economy of a larger overseas facility and produce it here without the duty differential which was the primary traction for such CKDs?

[AROO7]

Two upsides which I can think of from this-

1. More LR Defenders on Indian road.
2. Toyota Fortuner now has a price ceiling which it should find very hard to come close to.

[SAE40 in veins]

Originally Posted by Dibyendu Bose

I am not clear on one thing. If a CBU unit is drawing only 10% taxes, what incentive does a company have to manufacture the same domestically? Does it make sense to lose the scale economy of a larger overseas facility and produce it here without the duty differential which was the primary traction for such CKDs?

That is exactly the reason we do not have FTAs with China, Philippines, Vietnam, Turkey, Malaysia or the like so that they will simply export stuff to India and flood our market. Now UK being one of the most expensive manufacturing locations, it is easy to sign such a deal as the reciprocity of this exercise will massively benefit Indian Industry.

Now look at this, Indian made stuff gets accepted by UK at 10%, so we start big time exports to UK. Now when UK exports JLR vehicles to India at just 10% duties, it directly benefits the Indian exporters also as they in turn pay only 10% duty for exports to the UK and would export 10 times more (India will be easily the preferred manufacturing destination for the Japs and Koreans as this is a RHD market like the UK).

As an icing on the cake, the profits made by JLR (or at least a portion of it) comes back to India as Indians own it. So Corus, Tetley, JLR etc etc...the story goes on.

[DicKy]

Originally Posted by Dibyendu Bose

I am not clear on one thing. If a CBU unit is drawing only 10% taxes, what incentive does a company have to manufacture the same domestically? Does it make sense to lose the scale economy of a larger overseas facility and produce it here without the duty differential which was the primary traction for such CKDs?

In this case, JLR is assembling most of their higher selling models in India, and the new CBU rules may encourage importing than assembling especially for top Range Rover models.

But the Defender which is selling in good numbers is imported from a East European country.

Guess they are going to assemble the Defender here as it doesn't come under the UK-India FTA, while they will start to import some models from UK freeing up space in their assembly plant? Anyway, cheaper Defender will be good (though that would mean 3 door may no longer be offered). Like @AR007 said. Fortuner badly needs something above it to act as price ceiling.

[rtdp]

I don't fully understand the math here.
If 1.05cr starting price has 110% of tariff and now that is going down to 10%, why the price reduction is only 20L? I understand there is cost involved in plant setup in India and operations here, but still the price drop seems to be minor. How are the calculations working?

[14000rpm]

Originally Posted by AROO7

Two upsides which I can think of from this-

1. More LR Defenders on Indian road.

Will Rohit Shetty now blow up LR Defenders instead of Scorpio's?
Defender is a cash cow in the LR Portfolio and LR is doing all the right things.
However, I see this move as a 'add more profit per car to JLR' vs 'pass on all benefits to buyers'.

[AROO7]

Originally Posted by 14000rpm

Will Rohit Shetty now blow up LR Defenders instead of Scorpio's?

That day is still far in future . But you are on point about LR milking the nameplate. That said, I believe anything that keeps the brand alive and not get them on the verge of extinction, like Jaguar, is welcome because at the end of the day they are in the business to make profits.

[14000rpm]

Originally Posted by AROO7

That said, I believe anything that keeps the brand alive and not get them on the verge of extinction, like Jaguar, is welcome because at the end of the day they are in the business to make profits.

Or
1) Kill Jaguar and save the money towards fattening up LR margins or
2) spend the money to develop the next Gen Discovery and Discovery Sport which haven't seen a refresh in forever.

I don't have shares of JLR and hence I don't care about pt 1.

[PPS]

Originally Posted by rtdp

I don't fully understand the math here.
If 1.05cr starting price has 110% of tariff and now that is going down to 10%, why the price reduction is only 20L? I understand there is cost involved in plant setup in India and operations here, but still the price drop seems to be minor. How are the calculations working?

I'm not a mathematician but I have my doubts whether manufacturers like JLR & others really do pass on the benefits to the customer!

[saikishor]

I have a beginner level question: will the quality levels see a drop due to local manufacturing? Because CBU cars are always considered to have superior build quality when compared to locally made cars.

[ShreechandG]

Originally Posted by Dibyendu Bose

If a CBU unit is drawing only 10% taxes, what incentive does a company have to manufacture the same domestically?

Import duty tariff is 110% would be reduced to just 10%
But still we have to deal with Road tax, insurance,fastag,registration charges and what not over here... dat will correspond to 20L reduction in overall tariff

[GTO]

This is really the "ultimate" 1.xx crore rupee SUV. Oozing with character, comfortable, iconic brand, and very different from the usual German options. No wonder it is the company's no.1 selling product. I had spent a weekend with the Defender and absolutely loved it.

The 2.0L Petrol (adequate motor) starts at about 1.3 OTR. The 3.0L Diesel is at 1.6 crores, while the 5.0 Petrol also starts at 1.6 crores.

While the car has been a success, this kind of pricing is really pushing the limits. The diesel is grossly overpriced today. I don't think there is much room for it anymore as the Defender is after all a "utilitarian-luxury" SUV, and doesn't boast of outright luxury or quality (or even performance with the most popular 2.0L petrol). If CKD brings the pricing down by 20 lakhs, so be it. That's exactly what this awesome 4x4 needs to boost its sales.

[Kinshuk]

From what I know - this 10% for CBUs, has a quota. Only a limited number of vehicles per year will enjoy this benefit.
For out of quota CBUs, duty will be reduced over a 10-15yr period. So no immediate or major impact on pricing.
Duty reduction for CKDs, 16.5 to 11.5% will be the actual impact on costs.

[84.monsoon]

Originally Posted by rtdp

I don't fully understand the math here.
If 1.05cr starting price has 110% of tariff and now that is going down to 10%, why the price reduction is only 20L? I understand there is cost involved in plant setup in India and operations here, but still the price drop seems to be minor. How are the calculations working?

They are referring to CKD production to bring the price down by 20 lakhs. CKD kits are charged around 20-30% import duties. However, since the manufacturing happens in India, it is subject the GST of around 45%. So additively, you are paying 60% more than the landed cost even after getting GST credits for the input kit. This why the price cannot go down to half jusyvbecause one goes from 110% duties for CBU to 20% duties for CKD.

In any case, it is high time India slashed import duties for cars priced about 40 lakhs or so. The intent of the duty is to protect domestic manufacturing but the domestic players in reality do not sell anything above 30 lakhs. Forcing CKD manufacturing is not very attractive as the assembly operations are simple and does not really generate a lot of jobs.