HT Auto EV Conclave: Audi, Mercedes, Volvo explain why high taxes are a barrier2 min read . Updated: 12 Aug 2021, 10:02 AM IST
Luxury car space in India has expanded in recent times but remains small when compared to some of the largest markets across the world. Speaking at HT Auto EV Conclave, top officials of some of the biggest brands in the segment explain how affordability can help not just EVs but segment at larger.
Luxury vehicles form a small percentage of overall passenger vehicle sales in the country and the number is microscopic when it comes to electric luxury vehicles here. At a time when there is a clear focus on quickening EV adoption in the country across segments, there has also been a call from certain quarters about the possibility of reducing import duty on luxury vehicles - electric or otherwise.
While it was Tesla CEO Elon Musk who had squarely pointed to the import duties in the country as a roadblock, others have now started making similar opinions known.
At HT Auto EV Conclave held on Wednesday, Mercedes-Benz India, Volvo Car India and Audi India backed the call for a more reasonable import duty.
Balbir Dhillon, Audi India Head, admits that customers are willing to experiment and are positive about buying cars at a premium price point but adds that volumes will remain limited. "There is definitely a limitation when it comes to the price point and if the duty is lower, obviously, we would be able to address a wider section of prospective buyers," he said.
Martin Schwenk, MD and CEO at Mercedes-Benz India, further outlined that while the prospects remain strong for his company here, more may enter the luxury space if the affordability factor improves. "(In) The overall cost in the premium and luxury space for customers to purchase a car, the smallest part, it is the hardware. And the biggest part is based on taxes and duties. And specifically in import duties, we are having extremely high entry costs to India," he said. "While we are developing products, the question comes 'how do we develop the market in India.' For that, it is important if we can import vehicles and offer them at attractive price points."
Pointing that scale is very important, Schwenk said if only a few cars are imported, it may not be easy to localize these models. "When you have a market, you can start building locally. So for us, any reduction in duty structure would be helpful," he said. "For us, any car above $40,000 attracts more than 100% duty and any car less than that attracts 60% which is still a high number compared to international norms."
Volvo Car India's MD Jyoti Malhotra also echoed Schwenk's views and said that while the overall Indian automotive space has grown, luxury segment remains significantly small. "Taxes and duties are a barrier, in terms of the industry development and that applies to all the cars whether it is electric or ICE cars," he said. "Any type of rationalization of taxes and duties is always welcome, and that will ensure we are able to bring more cars which are available globally (and) at a price point which can improve share of luxury cars in the market."
Malhotra, however, also pointed out that it may also be just a matter of time and that while in times gone by, aspirations and affordability were both missing, people at present have the aspirations for luxury vehicles and want to buy these as soon as they can afford it. "They are willing to buy now and if there's a little bit of a push from the government in terms of rationalizing these taxes, it can be fantastic."