Hit hard by the Covid-19 pandemic, auto sales in India is expected to witness a steep decline in FY21. Luxury car sales, which accounts for only one per cent of the total car sales, may take a bigger hit as its target customers are in a cautionary mode. On Monday, Balbir Singh Dhillon, Head of Audi India and Manohar Bhat, Head of sales and marketing, Kia Motors India spoke about impact of Covid-19 on the industry, high taxes, releif from the government, among other things, in a chat with author and senior journalist Kaveree Bamzai and Prabhu Chawla, Editorial Director at The New Indian Express as part TNIE’s Express Expressions, a series of live webcasts with people who matter.
“A large part of the price customers pay when buying a luxury car goes to import duty, registeration tax and GST. We are just one per cent of the total car sales volume but we contribute almost 10 per cent of the total revenue,” pointed out Dhillon. Currently, the import duty on compete built-up (CBU) cars in India is between 60-100 per cent.
Then GST is between 40-50 per cent, depending on the size and engine capacity of the car, and registration taxes stand between 10-20 per cent. Let’s say, if one is buying a car worth Rs 1 crore, he might end up paying taxes in the range of Rs 65-70 lakh. For the locally manufactured ones, one ends-up paying 20 lakhs as taxes for a unit that is priced at Rs 50 lakh. “If this is not rationalised, we will not grow. The problem is not just tax. It is tax on tax,” said Dhillon. He added that high rate of taxes also impacts a company’s capability to export more from India.
“We have treaties with many countries. Export also has certain taxation. These are taxes which are higher in India as compared to many other countries. For example, export tax from Mexico is lower than xport tax from India,” the head of Audi India explained.
Korean carmaker Kia Motors, however, is happy with the response it has so far received in India. In its short one year journey, it has become a major player in the passenger vehicle segment with two big hits —Seltos and the recently launched Sonet.
“We are confident about the medium term estimate we had about the Indian market. Short term could have been better but we are not complaining. The GDP is expected to degrow this year and auto sales is closely linked with it. The biggest question is when will the industry return back to the 2018 level,” asked Bhat.
According to him, the government should look at demand stimulation at a more focued manner. “A cash incentive-based scrappage policy and tax rebate/relief on buying cars for a shorter duration can be helpful in improving sentiment,” he said.
Meanwhile, Dhillon said in the luxury segment, most of the buyers are businessmen, who have been severely affected by the Covid-induced lockdown, and now buying car is not their first priority.