Car buyers unlikely to benefit from localized production of luxury cars

After the hike in the import duty on completely knocked down units or pre-assembled cars from 10 percent to 30 percent by the Indian government in 2010-11 annual budget, automobile manufacturers have been scouring options and alternatives to the same. The carmakers are looking for options of local manufacturing of premium or costly cars to benefit from the low production costs. However, the profits from low taxes on the cars will not be shared with the customers.

The step to not share the profits with the customers is aimed at mitigating the impact of the high duty imposed on imported cars and pre-assembled cars, stated companies like Toyota Kirloskar which will commence the production of the luxury sedan Camry in India towards the end of 2012. Until now the sedan had been imported into Indian from Japan.

Currently, the import of cars is taxed with 60 percent tax while cars with pre-assembled engine and gearbox are levied with 30 percent duty. However, if the components of the car are knocked down further than the engine and the gearbox, the import duty levied is 10 percent.

Other car manufacturers planning production of luxury cars in India are Hyundai and Mercedes.