[vipul_singh]

Originally Posted by sandeepmdas

While there sure was a road map leading to BSIV by 2010. the Govt was forced to design and implement it. AFAIK there were numerous high court and a couple of supreme court orders/directives regarding this matter; many of the petitions were filed by NGOs. The GOI was forced by the judiciary to act.

Ha! Ha! In that case, I might have given the Government more credit that they deserved,

Your post reminds of a blanket order in Delhi which prevented people from using any sort of sun-film in cars. Later on, one of the sun-film manufacturers (Indian arm of Ray Kool Inc?) sued them which forced the Government to allow sun films upto the transparency levels required by the Motor Vehicle Rules.

[airbender]

Originally Posted by vipul_singh

Remember the '90s, with smoke spewing cars and commercial vehicles on our streets? The Government took a decision that pollution levels had to come under control. But they gave a well published long term plan on how to do it, starting with India 2000 norms and moving to BS IV in 2010.

I am surprised why the Government cannot publish a similar long term (at least 4-5 years) evolution plan for CKD duty structure?

What you are comparing is apples and oranges. While the one you quoted is a policy change the topic of this thread is closing a loop hole. Why would you need a long term policy to close a loop hole?

[EssYouWe]

@Avishar

With ASEAN FTAs and all in the pipeline, India can be a manufacturing hub as well! And with the cheap input costs here, I am sure they can build it a lot cheaper in India than in Germany.

All this hue and cry is simple hogwash! BMW has a proper assembling unit in Chennai if I am not mistaken. What stops these guys from establishing one? If companies aren't serious about the Indian market, we shouldn't bend over backwards to have them here. Seeing the amount of purchasing potential India has, it would be foolhardy for any global company to ignore it.

[vipul_singh]

Originally Posted by airbender

What you are comparing is apples and oranges. While the one you quoted is a policy change the topic of this thread is closing a loop hole. Why would you need a long term policy to close a loop hole?

I agree with your point. The two situations are indeed different.

But I still feel this could have been handled better given the impact on an important industry segment and given that investors in India have based their business on this loophole.

I am not ready to beleive (unless, of course, there is evidence on the contrary) that the Government did not know of this loophole and its importance until now. When they have led the industry players down this road, the right thing to do is to provide them a clean exit as well.

[xingamazon]

Originally Posted by ACM

Yep, totally agree

But that should also see prices of these models going down further due to local manufacturing (read total assembly) with possibly some of the components even being locally procured.

Merc also does share the 3.5L diesels between the E, S, ML and GL in different states of tune and they could continue that as well.

Simlarly the lower end Engines that go in the Audi Q7/A8 could go into the A4, A6 on the lower end.

Besides VW, Audi and Skoda could share engines (base for Audi and top for VW and Skoda)

It about the will do take a calculated risk and go full fledged.

Request you to understand the economics of your suggestions before making a business plan for Audi, which they already have people for. And based on whose recommendation they had decided to exit.

Take this for an example, Ford spent USD 500 million to start and engine plant an expand its assembly. Mind it not even a greenfield, just expansion takes that much money.

If you expect people like Audi, Merc to spend this much just to sell 100 odd cars per month. You got to be kidding me.

There is a life cycle for manufacturers, First they come in CBU, then they come in CKDs and then partial manufacturing and then full indiginization.

You cant expect people to join the localization band-wagon overnight. I agree india is a lucrative market, doesnt mean you should entail a "take it or leave tactics".

Just because we are patriotic doesnt mean our govt makes sense. Its a matter of macroeconomics and to an extent microeconomics, based on which Audi would have taken the decison.
If I was a manufacturers to make CKD and be taxed as CBU, I would rather manufacture in China or Thailand(where they already have economies of scale) and import.
Only reason people go for CKD is it makes some economic sense, when you remove the economy out, the business is also gone.

[airbender]

Originally Posted by vipul_singh

But I still feel this could have been handled better given the impact on an important industry segment and given that investors in India have based their business on this loophole.

What we are discussing here is similar to the story of Badmash Company. They use a loop hole in the system and escape paying any duty for the government until the rule is changed. Once that happens they are out of business.

On a different note I can't believe govt has the guts to take on the auto industry. Is this the same govt which didnot come up with health standards on soft drinks for almost ten years now. Let's wait and see.

From the last 7 years they have been in power, this is the only thing they did to benefit the aam aadmi(if the policy stands).

[harishr]

Audi will not leave. Given the segment they are in, all of their competition is in the same boat, so they will not lose any ground to them. Sure, sales may drop, but their customer base may not be as price sensitive as those in the lower segments. I think they are in with a longer term perspective anyway, so they can afford to wait it out.

But I can understand their outrage. It is wrong for GOI to shift the ground from under these players. Sure, it can be argued that its only enforcement of existing rules, but its interpretation has to be stable as well. If I were Audi, I'd hate to do business in India, but I'd grin and bear it because I don't have a choice.

It may be a great opportunity for Maruti/Kizashi or Skoda/Superb to take the plunge and set up manufacturing here. The Indian market is probably becoming mature enough for luxury cars anyway. Considering that in today's world even a Civic/Laura barely make the grade as premium cars.

The risk to Indian industry does not come from Germany though. It comes from China. Its all in the small things. Hope the GOI keeps an eye on that.

[diffsoft]

What would it take for companies who would want to change their plants from assembly of CKD including engine, gearbox etc to assembling engine, gearbox and transmission and make the car?

Specifically in terms of resources - capital, land, labor, vendor base and time?

Cheers,

[fz_rider]

If they're planning to exit , they would've stopped advertising their products ! And the duty isn't only for Audi , it's applicable on every big small company . So why worry ? Instead , Audi is expanding its dealerships big time . I think , the reporter just caught the wrong words , and made an article out of it !

[sadnabrina]

CORRECTION - Please read CAR India instead of TopGear in the below post.

Originally Posted by sadnabrina

Actually, if you read the TopGear Magazine March Edition, BMW is working on building a front wheel drive small car platform keeping both the European and the developing market in mind. A lot of investment and effot has already gone in into that platform. So seeing a BMW FWD hatch in affordable price range (definitely not the 4-6L - but possibly 6-10L) will no longer remain a dream.

[EssYouWe]

Originally Posted by xingamazon

Request you to understand the economics of your suggestions before making a business plan for Audi, which they already have people for. And based on whose recommendation they had decided to exit.

I think such sarcastic statements are uncalled for. Let us keep this discussion intellectual and not question each others' capability to analyze the situation.

Take this for an example, Ford spent USD 500 million to start and engine plant an expand its assembly. Mind it not even a greenfield, just expansion takes that much money.

If you expect people like Audi, Merc to spend this much just to sell 100 odd cars per month. You got to be kidding me.

If I understand correctly, BMW already has a proper assembling plant in Chennai. Does Audi operate anything similar? Just screwing a bunch of things together should not constitute assembling. Not only are we losing tax revenue through it, we also stand to lose potential employment and investment.

There is a life cycle for manufacturers, First they come in CBU, then they come in CKDs and then partial manufacturing and then full indiginization.

You cant expect people to join the localization band-wagon overnight. I agree india is a lucrative market, doesnt mean you should entail a "take it or leave tactics".

Keeping the CKD definition porous and the duty at just 10%, the shift to partial/full manufacturing will never take place. The economics you speak of, make this obvious.

Just because we are patriotic doesnt mean our govt makes sense. Its a matter of macroeconomics and to an extent microeconomics, based on which Audi would have taken the decison.
If I was a manufacturers to make CKD and be taxed as CBU, I would rather manufacture in China or Thailand(where they already have economies of scale) and import.
Only reason people go for CKD is it makes some economic sense, when you remove the economy out, the business is also gone.

What makes you feel Thailand is a bigger market by volumes than India? We are a growing country. We are a huge potential market. At par with China and much much bigger than little countries like Thailand. If companies can establish countries like Thailand and South Africa as export hubs, why can't India be made one? Not to mention the fact that there is a huge domestic market developing as well!

Please try and see the long term effects as well. Would you want to continue paying 25 lacs for your Audi which costs 15 lacs in the US? If VAG wants business from India, they must fight and compete for it. No one will give them market share through such arm twisting tactics.

This is a very good opportunity for BMW and Merc to highlight their commitment to India and Audi's perceived disinterest in a long term engagement with India. I only hope they capitalize on it and Audi suffers for trying to be bullish with India.

Also, please do not forget that under the recent EU FTA, the duty on automotive components will progressively be reduced to sub-5% levels. All Audi needs to do is invest in a proper assembling unit in India and they will be good to go.

Cheers!

[HKap]

Originally Posted by xingamazon

Request you to understand the economics of your suggestions before making a business plan for Audi, which they already have people for. And based on whose recommendation they had decided to exit.

Take this for an example, Ford spent USD 500 million to start and engine plant an expand its assembly. Mind it not even a greenfield, just expansion takes that much money.

If you expect people like Audi, Merc to spend this much just to sell 100 odd cars per month. You got to be kidding me.

There is a life cycle for manufacturers, First they come in CBU, then they come in CKDs and then partial manufacturing and then full indiginization.

You cant expect people to join the localization band-wagon overnight. I agree india is a lucrative market, doesnt mean you should entail a "take it or leave tactics".

Just because we are patriotic doesnt mean our govt makes sense. Its a matter of macroeconomics and to an extent microeconomics, based on which Audi would have taken the decison.
If I was a manufacturers to make CKD and be taxed as CBU, I would rather manufacture in China or Thailand(where they already have economies of scale) and import.
Only reason people go for CKD is it makes some economic sense, when you remove the economy out, the business is also gone.

I believe that this duty hike is a good (long term)and bad thing(short term). However, what we need to understand is that setting up plants in India will only lead to more job creation in India. Now the question is how do you get these guys to set up plants here. One way is to increase the duty on imports and force them to set up a plant if they want to compete with other people. We have now reached a stage where no auto maker can ignore our market. It might sound a lot like protecting domestic players, but its not

Suzuki and Hyundai aren't local players. I know that the likes of Audi and BMW address a very different market as compared to Suzuki and Hyundai but the potential of growth for Audi and BMW is MASSIVE!! Remember our middle class is bigger than the entire population of the US. My point is that if lets say Audi sets up a plant here they should be able to cut their prices significantly and possibly increase their profit margins as well. This makes their cars more affordable in India thereby increasing sales figures and creating jobs.

If you think about the price of an Audi A4 2.0 TFSI in the US its around 30k USD. If they can sell the A4 at that price here in India, I am certain that they will more than double their sales figures. The Indian middle class wants to have the lifestyle of the western world and to a middle class family in India a car means a lot more than it does to a middle class family in the US. Take a look at the way how LCDs are flying off the shelves in India. If you look at the pricing they are slightly more expensive than the same models in the US. This just means that the spending power in India has picked up and Audi would rather be here than not!!

[ajmat]

Just been reading about Russia. They are allowing duty free component imports as long as each assemble commits to producing 300,000 units per annum

BBC News - Russia banks on foreign carmakers' interest

[gsferrari]

Bye Bye Audi...until someone from India acquires you

The Jags look better anyway! Heil Ratan!

[xingamazon]

Originally Posted by EssYouWe

I think such sarcastic statements are uncalled for. Let us keep this discussion intellectual and not question each others' capability to analyze the situation.

You are right, should have toned that down, thanks for the info anyway. Will tone myself down. But I was not the one who started, people have called me nonsense for putting my points across few threads back.

If I understand correctly, BMW already has a proper assembling plant in Chennai.

The BMW operation is a CKD operation, and needless to say they also will be affected by this.

What makes you feel Thailand is a bigger market by volumes than India? We are a growing country. We are a huge potential market. At par with China and much much bigger than little countries like Thailand. If companies can establish countries like Thailand and South Africa as export hubs,

Two corrections here:
China is a way bigger market than India not at par like you mentioned.
They sell around 13 million and we hardly touch 2.5 million a year.
Thailand is not a big market I know, but it had FTA with any country you name, thanks to its tax laws. Thats why it almost functions like the manuf hub for AP including australia and even Europe now.

This is a very good opportunity for BMW and Merc to highlight their commitment to India and Audi's perceived disinterest in a long term engagement with India.

No point in showing commitment here, you never know they might follow suit too.

Originally Posted by HKap

If you think about the price of an Audi A4 2.0 TFSI in the US its around 30k USD. If they can sell the A4 at that price here in India, I am certain that they will more than double their sales figures.

Its cheap in US not because of manufacturing there, its cos of thier tax structures.