Duty hike won't apply brakes on luxury car demand: Automakers

Automobile companies expect little impact on demand for high-end imported cars despite a Customs duty hike in the 2023-24 Budget.

- SOHINI DAS DEEPAK PATEL

Luxury carmakers feel that demand for most of their popular models would remain high.

The Budget raised the Customs duty on completely built-up (CBU) vehicles - which have cost and insurance and freight (CIF) value of less than $40,000 or an engine capacity of more than 3,000 cc (petrol) or 2,500 cc (diesel) to 70 per cent, from an earlier 66 per cent (60 per cent tax plus 6 per cent social welfare surcharge).

The Customs duty on electric vehicles - which are imported as CBUS at a CIF value of less than $40,000 --has similarly been raised to 70 per cent from 66 per cent.

Also, the Customs duty on semi-knocked down (SKD) vehicles has been hiked to 35 per cent from earlier 33 per cent (30 per cent tax plus 3 per cent social welfare surcharge).

Puneet Gupta, director, S&P Global Mobility, pointed out that the effective duty increase, after accounting for social welfare cess reduction, is around 4 per cent only. "For luxury carmakers, the impact would not be much, but a sudden hike in duty is not a good reflection of policymaking for multinational OEMS," Gupta noted.