[Aroy]

The reason that cars are priced ridiculously is the tax system. The total taxes on a car (cascading excise duties at each stage of manufacturing, sales tax etc) are nearly 100% of the original cost. If you want any corroboration of the low cost of manufacturing, just note the price of cars exported, they are half the Indian price. So much for our inefficient manufacturing.

So if the import duties are lowered, government will have to lower the excise duties on cars manufactured here, else the dice would be loaded against Indian manufacturers and it would be cheaper to import than to manufacture. That is why I welcome the duty cut, as it will ultimately result in excise cut, thus lower all car prices!

But the down side of lower prices is ever expanding oil import and road congestion. So not only will government loose out on taxes, it will have to spend on infrastructure too (a loose loose situation). It is now upto the government to figure out how it will reduce import duties, but at the same time not loose money.

[Ricky_63]

Originally Posted by tsk1979

Don't worry, if the actual benefit to car companies is 35% by way of duty reduction, then be assured that atleast 25% is passed on to customer.
The reason is that airlines have lot of cartelization, and automobiles have cut throat competition.
Think of it this way.
Company A may not pass the benefit and price its SUV at 40 lakhs.
Company B which has a direct competing model can price it at 25 lakhs, eating away the sales.

Remember, BMW and Mercedes are also trying to expand their customer base. The X1, which cuts into 20L territory is a shining example.
In the end its profit which matters to companies.

If they can increase their sales by more than 35% by passing on 35% benefit, they will pass the benefit. If they think sales increase will be marginal, they won't pass on the benefit.

+1 That seems to explain a lot & put many a speculation to rest. Well worded & sharp !!




Cheers

[e92335]

Originally Posted by Aroy

The reason that cars are priced ridiculously is the tax system. The total taxes on a car (cascading excise duties at each stage of manufacturing, sales tax etc) are nearly 100% of the original cost. If you want any corroboration of the low cost of manufacturing, just note the price of cars exported, they are half the Indian price. So much for our inefficient manufacturing.

So if the import duties are lowered, government will have to lower the excise duties on cars manufactured here, else the dice would be loaded against Indian manufacturers and it would be cheaper to import than to manufacture. That is why I welcome the duty cut, as it will ultimately result in excise cut, thus lower all car prices!

But the down side of lower prices is ever expanding oil import and road congestion. So not only will government loose out on taxes, it will have to spend on infrastructure too (a loose loose situation). It is now upto the government to figure out how it will reduce import duties, but at the same time not loose money.

Bingo --- tyhe only reason cars are so cheap in the US is beacuse of the volume they sell. Bulk purchases always tend to be a lot cheaper. Also add to the fact that the cars sold here are quite basic, and they make a killing on the options list, which the Indian consumer may get as a standard feature on their cars. So an M3 that costs 57K in the US as a base price which when specced up gets close to about 80K, which is what is sold to the indian consumer at ~ 70 lakhs. Now if they were to sell this car as a stripped down version at ~ 55 lakhs, they would indeed entertain more requests.

If the prices expect to fall by 40%, that same car at 55 lakhs would now be available at ~ 30-35 lakhs which would attract a whole slew of buyers and would increase their annual sales of 100 units in India to about a 1000 which would indeed be more profitable in the long run

[raul]

If you price cars reasonably you will get volumes especially when they are much cheaper elsewhere, if you priced a CRV at $50k in the US as it is in India volumes would shrink pretty rapidly.

[pamiboy]

Originally Posted by mac187

The problem is, we will become a import oriented nation. The idea is to be self-sufficient (not realistic) or export oriented (wishful). We need to strike a fine balance between these three. Below are the issues, as i see it,

1. Forex:
Currently we are losing a lot of forex on oil as we cannot produce to fulfill the local demand. This inturn will affect the value of our currency. We will end up paying higher coz what we can buy today with INR 1000 will need INR 1500 ~ INR 2000 if the currency gets devalued! (just an ex, not based on any calculation)

2. Loss in creation of jobs
If the same co's had opened factories in India, it would have given jobs of lakhs of people here. Note, i am talking about both white & blue collar here. Lesser jobs --> more unemployment --> higher income divide --> higher crime. More people in BPL, higher will be need for free medical care, budgets for the same have to go up. You and I will have to pay for the same via income/ other tax!

3. Death of local player
Remember Gold spot, Torino all these co's couldn't survive against the deep pockets of Pepsi and Coke. The same will happen to say companies like Force, God forbid, Tata. It also means loss of jobs to the once currently employed by these companies (directly/ indirectly). The other day i was watching Top Gear, they said at one point there were 130 local car manufacturers in Britain, until the Germans (VW) arrived.

4. Nurture local companies
If we let a free hand, then none of the Indian companies will survive. BMW and likes have been around for 100's of years and have reached this level. Its wrong to expect Tata/ Mahindra to fight with them, these guys haven't had the time to get ready for battle. Let them grow via the natural process of failure and improvement. Compare apples to apples here, compare Indian car makers to Chinese car makers (coz, I think the respective local industries came about almost at the same time)

Lastly, why shouldn't we tax these guys more? When the US can tax Indian IT companies to raise money for their Internal security budget. Why shouldn't we tax imports to raise money for our budget.

General observation, most of the replies by the members here are from a point of view of a car buyer. Like, this we would expect that there shouldn't be any tax at all on the imports! We all would love to drive around in Mercs, BMW etc. But if you look at the marco view we all will have to pay dearly if this were to come true.

A+ to these observations:
Besides this everyone seems to be concentrating on new cars only. What about used cars? They will deliver a nasty blow to the local auto industry.
Will you pay 5 lakhs to buy a new small car made in India or get a 2-3 year used larger / safer / higher segment car from Europe for the same price? Imagine all those europeans bored with their 2-3 year old cars. Currently they won't get 1/3 of original price if they want to sell. Now assuming India opens its market to them the used car will flood Indian market (more than the new cars...believe me). For the Europeans, their used car prices will stabilize at a higher level. Which means most of them will sell their car to agents to be rolled off to India and they will buy a brand new car. The net effect will be that new car sales in Europe will boom and India will become a second hand dumping car market. The manufacturers will no longer have to cater to Indian design tastes as thier local sales will be excellent.

The government is trying to prevent exactly this scenario. But I believe they are being bullied on / bribed by the Europeans to get full unrestricted access. If they do it now the Indian competition won't last long. They want to prevent Indian manufacturers from becoming big players.
I'm not saying that open market is bad. But don't compare us to Europeans and Americans and their market system. Even developed nations like South Korea (until recently)/ Malaysia, etc are wary of this situation and protect the local manufacturers. (That's one of the reasons that Hyundai/ proton got into the big league). Let our market mature. Let the industrial growth stabilize for a longer period and uplift the majority out of poverty. If we don't have new factories coming there wont be any jobs for us and no money to buy these "cheap" european cars.
What pride will be left in us if we won't have a surviving Indian name in the auto industry.

[aditya_911]

@pamiboy ,till what time do you expect the consumers to suffer for protecting the local manufacturers .IMO the removal of the duties will force the local manufacturers to provide better features at better prices.

[Ricky_63]

Originally Posted by aditya_911

@pamiboy ,till what time do you expect the consumers to suffer for protecting the local manufacturers .IMO the removal of the duties will force the local manufacturers to provide better features at better prices.

Could not agree more with that !!



Cheers

[R.I.P]

Although i am skeptical about any sizable reduction in prices of luxury sedans & SUVs, these agreements will surely change the ridiculous pricing of cars like the fiat 500 and VW beetle. Further hybrid cars will also have a level playing field in the market.

i am positive

[pamiboy]

Originally Posted by aditya_911

@pamiboy ,till what time do you expect the consumers to suffer for protecting the local manufacturers .IMO the removal of the duties will force the local manufacturers to provide better features at better prices.

What I was thinking is more of a gradual shift. I mean don't open the floodgates today but allow a gradual reduction of tarriffs in a reasonable time frame like 10-15 years for the industry to consolidate and improve their products, develop and assimilate new technology. None should expect Indian companies to produce world class cars all in one go. It only comes with time and sustained effort on their part, some hits and misses.
I would suggest we should completely open our markets to all kinds of competition when Indian companies produce world class automobiles (I mean in design, innovation and technology), when India is considered a industrialized country / developed market, when the average Indian has as much spare money as those in the developed countries, and those auto companies in developed countries are as much worried about competition from India (as they are worried about chinese or south Korean competition)

Do I sound reasonable? Now as per the government India is hoping to be developed nation by 2020. Am I correct? Let wait and see what happens. Meanwhile hang on to our jobs.

[Ricky_63]

Originally Posted by pamiboy

What I was thinking is more of a gradual shift. I mean don't open the floodgates today but allow a gradual reduction of tarriffs in a reasonable time frame like 10-15 years for the industry to consolidate and improve their products, develop and assimilate new technology. None should expect Indian companies to produce world class cars all in one go. It only comes with time and sustained effort on their part, some hits and misses.
I would suggest we should completely open our markets to all kinds of competition when Indian companies produce world class automobiles (I mean in design, innovation and technology), when India is considered a industrialized country / developed market, when the average Indian has as much spare money as those in the developed countries, and those auto companies in developed countries are as much worried about competition from India (as they are worried about chinese or south Korean competition)

Do I sound reasonable? Now as per the government India is hoping to be developed nation by 2020. Am I correct? Let wait and see what happens. Meanwhile hang on to our jobs.

Why does one need 15 years ? Either you do it or you do not. You are being gracious. Or you are 20 yrs old I would not last 15-20 years to "enjoy" real time pricing, maybe my kids will enjoy the real time pricing..

Let us get real



Cheers

[zulfi hansi]

Lets look at it this way, which are the Indian companies we are talking about, M & M, TATA.
Points to note:

1. What is the market share of the Indian companies in our market? And what is the market share of foreign MNC's (which include Maruti too).

2. Now these companies are not even thinking to enter in the segment that the 3 Germans hold (or for that matter all cars which are in 15 lakhs + segment), and are not inclined to do so for at least another 10 years, so to speak we might just be protecting them for the next 10 years when they actually do not need it. The point here is even if they do come with cars costing 15 lakhs and above but when the consumer already has a choice (which are many and better), these cars will be out of market through market dynamics, so where is the protection in play? You cannot compare an X1 with aria or the new M&M lifestyle SUV, simply cannot (not segment and size wise but quality and tech wise).

3. Now if the Govt. does make a calculated reform (which we expect), and allow reduction of duty in a segment that accounts for less than 15% of the total market share, yes it might encroach in certain lower segments and still will not cross 15% of the total market share. The loss of revenue to the Govt. is not major enough in these circumstances.

You cannot force any foreign company to start assembling or manufacturing in India. And they will not do it even if the Govt. imposes an import duty of 500% (in that particular premium segment of 15 Lakhs + that we are discussing about). Eventually they will do manufacture and assemble cars if it works out for them and it will if we are competitive enough, which we are and its only a matter of time (eg. Hyundai). Plus the rider to the companies that they have to pass on the benefit to the consumers.

And btw now that JLR is owned by an Indian company, why not 0 the import duty for this company?

[akj53]

Well the cat will be out of bag this noon. I think Duty reduction will be good for all concerned and will force the industry to stand on it's own feet and stop robbing the customers. Reduction of prices of high end cars will cascade down and will also force price reductions down the line.

I don't support the view mentioned above that JLR should enjoy 0 import duty just because it is owned by an Indian company. When the German 3 can assemble their cars here, what is stopping Tata in at least doing a CKD assembly here. Law should be same for every body.

[mayankk]

WHat i want to know is how this will affect the kizashi's prices?

Did maruti align the launch with this?
hmmmmm

[zulfi hansi]

I don't support the view mentioned above that JLR should enjoy 0 import duty just because it is owned by an Indian company. When the German 3 can assemble their cars here, what is stopping Tata in at least doing a CKD assembly here. Law should be same for every body.[/quote]

JLR was just a passing shot humor, not in any seriousness, it was to portray the illogical justification many give for protection towards 'Indian companies'.

[rjalihal]

Gotta wait for the budget session and their take on this. Either ways, even if the EU-India agreement is signed, it will be in a staggered phase. While i agree car prices (import) will reduce by 50%, i don't think it will be in 2 months time. A time frame of 2 years+ is more likely.

Cheers,
Rohan