Car Duty, Tax and Pricing...

   
   Import Duty. This is something which isn't really loved by car buyers. Most people as well as companies despise the high rate of import duty in our country. The reason is obvious - the Extremely high import duty leads to a car's price to shoot up to such an extent that at times, it can cost upto 2x it's original price. But, most people do not wait for a moment to see the reason behind this high rate of import duty on foreign cars in our country. It's quite a simple reason actually. By causing the cost of imported cars to shoot up substantially, the government actually helps Indian automotive companies to have a good number of  car sales.
       If there wasn't such a high rate of import duty, then everyone would be driving Audis, Range Rovers and BMWs and in such a situation, the Indian companies would see very sluggish movement of sales which would cause them at times to enter into losses. Another aspect of this high import duty is that it discourages companies from importing cars into the country in the form of CBUs (Complete Built Units). Hence, the companies importing cars into the country import many of them in the form of CKD's ( Knock Down Kits) which increases the number of Indians employed by these companies due to need for employees for the kit assembly. So, by going via the CKD route, a company does not have to pay a duty rate as high as that on a CBU. Along with this, it helps in providing employment in the country too. Hence, a company would always prefer the CKD route (unless a car needs such precise workmanship that it can't be assembled any where else in the world or the company doesn't want to put down money for the building of a plant here).
     Coupled with this, another advantage of the high duty rate on imported cars in our country is that it encourages the Indian car makers to try to offer better cars at lower price points. An obvious try on Mahindra's side is the Mahindra XUV 500 which is fully built in India and provides competition to cars such as the Nissan X-Trail and the Honda CRV. The difference in the prices of the XUV 500 and the X-Trail is astonishing too. Both come with similar features and in many aspects, the XUV 500 is much better loaded than the X - Trail. Hence, even though the XUV 500 is a better product than the X-Trail in many aspects, it is around 16.2 lakhs CHEAPER THAN the X-Trail ON ROAD IN MUMBAI !! (as of 12-01-13).
     This makes it pretty clear that Indian car manufacturers can have the upper hand in the Indian premium car market if they try. Mahindra took the dive. It succeeded. Tata Motors took the dive with the launch of the Aria. But, it was a fail - the clear reason was that it lacked in many aspects. I'm not saying that the XUV is an excellent product in all aspects. But, it's true that it is much better than the Aria in many aspects. Maruti Suzuki doesn't seem to be trying. All it did was that it imported the CBU Kizashi into India which failed. Probably if it was a CKD, or completely built in India, it would've succeeded in India.
   

 - Naayl Humza,

14 Year old Car Enthusiast.