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Luxury cars in India to get cheaper.

New Delhi, April 20 -- The EU, with sluggish sales of automobiles has made a provision under the Indo-EU FTA to allow import of cars into India at concessional duties. This would aid in a dramatic reduction in the cost of luxury cars in India, opening up the market to a larger population. The government under pressure from Japanese and Korean auto manufacturers will also provide concessions to them under FTAs with their countries.

A report in The Economic Times says, under the Indo-EU FTA, the European manufacturers will get a concession in the import duties of cars. Currently cars with a landed cost of $40,000 (around Rs 22 lakh) face a 100% customs duty, and cars below that pay a duty of 60%. Other taxes including countervailing duty, special additional duty and cesses and surcharges bring up the total duty incidence to a maximum of 174%. Under the concessional import duty of 30%, the total duty incidence would fall around 80%, less than half off the current rates.

Cars which have a landed price of about Rs 25 lakh, are sold in India at about Rs 69 lakh currently, but under concessional import duties the cost will be in the ware bouts of Rs 45 lakh.

There is also a scheme to allow the import of 2.5 lakh vehicles under a reduced import duty of 10% over a period of 5 years from 2017 to 2021.

Although the reduced duties will be applicable to all cars exported from the EU to India, experts believe that imports will be largely restricted to large luxury vehicles. Also the Korean and Japanese manufacturers will not benefit as much as the Europeans as they cater more to the mid segment rather than the high end market. Companies like Honda have already started local assembly of its CRV model in India as even the reduced import duties will not aid in competitive pricing of the car.

Lamborghini Indias head Pavan Shetty said the duty reduction will give a big boost to demand for luxury cars. "It will surely expand the market, by at least double. By 2017, the per capita income as well as the domestic economywill expand from the current levels, and the infrastructure will also be better. The timing of the duty reduction will thus be perfect to give a fillip to sales," he said.

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Publication:Wheels Unplugged
Geographic Code:9INDI
Date:Apr 20, 2013
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