Re: Entry-level luxury cars may cost more : Budget 2011 Quote:
Originally Posted by Yeldo Income and Corporation taxes account for 35% of the government's revenue, and taxing a luxury car that is bought by those who pay these any more than the present level is what you may define as oppressive taxation.
There is no genuine eco- friendly vehicle in the truest sense of the phrase, my dear sir. Almost all such vehicles are made for the benefit for emission targets, credits and R&D grants and write- offs that a regulate- all EU bureaucracy and a chocked- with- smog California politicians dream up to satisfy the outcries made at fund-raising events of activist groups.
Your point taken and is well- intended, but it is not economically feasible to insist that every car should have such levels of localization, especially comparatively low volume ones. And remember this proposal also hits manufacturers like Toyota who are not exactly luxury manufacturers.
What about products and services other than cars- are they also localized to such extent? For example, a cut- off percentage for foreign components in telecommunication equipment or computers? Or may we demand a 50% localization in airline personnel on flights operating out of India? Worse, is the petrol we put in our cars 60% Indian? How many of these auto manufacturers are 60% Indian owned?
Further, if every country starts on setting such norms, were would our exports go? Or would we be able to export anything at all including human capital? An open economy, Sir, is what brings prosperity and opportunity. Not synthetic and artificial barriers. |
I completely agree with yeldo and would like to take his point further. Suppose that the germans do decide to start up an engine manufacturing plant in India. Everyone here seems to believe that prices of these cars would come down further. But I beg to differ. Engine production plants require huge infrastruture. There will be huge fixed overheads [such as depreciation, land usage related expenses] which have to be recovered from the product they sell.
this is how it works. They first estimate how much they will have to spend on such fixed overheads, then estimate how many cars they are going to produce in the same period. Thus, they will have an estimate as to how much fixed overhead is to be charged on each product. Since the luxury cars still have volumes of barely 5000 a year, each car would have to bare a huge part of the overhead.
For someone like toyota who has fairly large volumes, fixed overhead per car would be far lesser [fixed overhead reamins constant, irrespective of the number of units produced].
Simply put, prices might still be as high, and in extreme circumstances, higher than current prices. Unless numbers in production increase, it is just not feasible.
If this bill is passed, IMO the manufacturers would probably cut a few features, increase the prices but 2-3L and continue. .
Losers in this case: US! |