Lexus, Infiniti India launch plans put on hold

Japanese carmakers Toyota and Nissan have put the brakes on their plans to launch luxury brands Lexus and Infiniti in the country, partly because India's free trade negotiations with European Union may make German rivals BMW, Audi and Mercedes much more competitive.

Toyota had last November announced its plans to drive in Lexus next year, while Nissan announced its intention to launch Infiniti range in March this year. Related: Toyota to unleash Lexus in India in 2013

"Currently we are reviewing our business model and no decision has been taken on the model range to be launched. There could be some direction by the end of the year," Sandeep Singh, deputy managing director of Toyota Kirloskar, said.

Industry insiders say Toyota and Nissan are reviewing the situation due to increase in import duty, the slowdown in demand, free fall in rupee valuation and, most importantly, uncertainty over India's trade talks with the EU.

"Japanese car makers maybe holding back their launch plans owing to the decision on the free trade agreement with the EU," VG Ramakrishnan, senior director, automotive practice, at Frost & Sullivan, said. "There needs to be clarity so that decision on volumes, investments can be made," he said.

The European Union has sought sharp duty cuts on fully built cars under the FTA and media reports indicate that India may slash customs duty on a certain number of cars imported from Europe to 10%-30%.

At present, India charges 60% or 75% customs duty on fully built cars depending on price and power. Including countervailing duty, sales tax and other cesses, the effective duty on imported cars ranges from 135% to 157%.

If the FTA brings a concession for European cars, then German luxury carmakers BMW, Audi and Mercedes Benz-which are already engaged in a three-way battle for supremacy in the Indian market will be able to price their vehicles much more competitively than the Japanese and American rivals.

GM India recently shelved plans to launch its luxury brand Cadillac in India and plans to focus on the Chevrolet brand for which it has been investing in expanding capacities.

Trade sources said the Japanese firms are reviewing the situation after zeroing in on the product portfolio, exclusive dealerships and launch date. Toyota announced plans to launch Lexus in India by 2013 at the Tokyo Motor Show in November 2011. Toyota, which has been evaluating the feasibility of launching the car in the market for several years, was moving forward on the launch date, the product portfolio and zeroed exclusive dealers for the Lexus. The Lexus was an early entrant in the US market. Later, the company expanded its range in Europe and Japan. In India, high-end consumers are well aware of the Lexus brand and experts say that it would be easy launching the brand here.

For Toyota Kirloskar, the launch of Lexus was part of a strategy to get a larger pie of the Indian car market where it currently has less than 5% market share.

The Japanese car major has announced plans to make the Camry in India, which till recently was a CBU. This would call for a lower price and higher sales of the Camry, said people in the know.

Nissan India, which sells the Micra and the Sunny in the country, was considering launching the Infiniti brand. "If and when it makes good business sense to introduce Infiniti we will consider it. We are always studying ways to expand the availability and reach of Infiniti," Takayuki Ishida, MD & CEO of Nissan India, said.