Budget 2018: Luxury Cars And Bikes Become More Expensive

Time and again, luxury cars have faced heat from the Indian government, be it because of additional cess, GST, diesel ban or the cost of components going up. In yesterday's budget announcement, the same happened, again. As a result, prices of all CKD and CBU models (both cars and bikes) will go up. And then there is the fluctuation in the fuel pricing.

When it comes to how it will affect of cars and bikes and which ones in particular, there are four major takeaways. Let's tackle them one by one.

1. Increase In Import Duties Of Automotive Components

Not all cars are fully made in India. Almost all the carmakers import some part or the other and all those imported parts attract an import duty of 7.5 per cent to 10 per cent, varying from part to part.

The customs duty on such imported components pre-2018 Budget was 7.5 or 10 per cent. Now, those duties have been increased to 15 per cent. This means all components being imported will now cost more by 5-7.5 per cent. This move has been made in order to promote the Make In India initiative.

2. Increase In CKD Kit Duty

Earlier, cars or bikes sold in the country like the Mercedes-Benz E-Class or the Suzuki Hayabusa used to attract an additional duty of 10 per cent, which have further been raised to 15 per cent. This is an additional 5 per cent hike to the one discussed above (point 1). Whether the car/bike manufacturers decide to pass on this price hike to the customers or take a hit themselves has not yet been announced, but it's clear that they are unhappy.

To quote a few, Mercedes-Benz's MD & CEO, Roland Folger, said, "The increase in the basic customs duty of auto parts, accessories and CKD components is unfortunate, and comes as a surprise. It will highly restrict the growth of the luxury car industry."

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Rahil Ansari, head of Audi India, also expressed his disappointment and said: "Increase in custom duty is going to definitely affect the prices again, which will further confuse the customer. The Union Budget 2018-19 is disappointing and against the spirit of partnership."
Where luxury carmakers are not happy with the move, local components manufacturers have welcomed it as an opportunity to grow business and support the Make In India initiative.

3. Increase In Duty On Importing Cars And Bikes

As we’ve explained earlier, Completely Built Units Or CKDs are the cars or bikes which are imported from the country they are built in and sold here without any other major assembly. Cars like Lamborghinis and Ferraris and bikes like Aprilias and BMWs all fall under CBUs.

The older import duties on these were 20 per cent, which has now been increased to 25 per cent. So, all of these cars and bikes will now cost you 5 per cent more.

4. Mystery Of The Fuel Price

Fuel has become costly. Now, as a relief, two rupees were deducted from the basic excise duty and the additional excise duty of six rupees was also removed, making petrol Rs 8 cheaper per litre. But a Road and Infrastructure Cess of eight rupees per litre has been added to the cost, so we are back to where we began. And the education cess of 3 per cent has now become education and health cess of 4 per cent, which will further add to the cost.

These are the key highlights from the 2018 Budget session on how it will affect cars and bikes. If you have any questions, please ask them on our social media platforms.