Prices of luxury cars set to zoom

NEW DELHI: Luxury cars from companies like BMW, Audi and Mercedes are set to become costlier with the government hiking customs duty on assembled cars to 30% from 10% before Budget. While companies refrained from making comments, analysts said prices of cars assembled from CKD (completely-knocked down) kits may see an upward revision—to the extent of Rs 4 lakh.

While the industry is not happy with the development, it heaved a sigh of relief as FM Pranab Mukherjee brought down the duty to 30% from 60% proposed in Budget, reacting to protests by the luxury carmakers. “We are evaluating the same (FM statement) on a case-to-case basis and will prepare a final assessment. We will thereafter share further details,” a Mercedes Benz official said. Officials at BMW and Audi refused to comment.

The duty hike on CKD kits in Budget had taken the industry by surprise. Most had reacted sharply to the move with Audi even threatening to “scale back” investments, while Mercedes asking for a one-year grace period so that companies could adjust production according to the new norms.

At the heart of the matter lies the change of definition that the government made in classifying a CKD vehicle. Since most CKD kits have pre-assembled engines and gearboxes, all of them were affected by the new definition.