Luxury carmakers, hit by diesel ban in the National Capital Region and demonetisation in recent times, are treading cautiously in the run-up to the Goods and Services Tax (GST). The country’s largest luxury carmaker, Mercedes-Benz, has lowered prices by up to nine per cent with immediate effect to ensure that customers do not postpone purchases to wait for a price benefit that kicks in from July. BMW is offering discounts and benefits until actual price cut happens to keep sales intact. Companies do not want to take any hit on sales.
The minimum price cut on a Mercedes car is two per cent and in some cases nine per cent in certain cities (where taxes were higher). The company said on average the price has been cut by four per cent. In Delhi, ex-showroom price of CLA 200 sedan is being cut by Rs 1.4 lakh to Rs 30.6 lakh. The price of S Class Mayback S 500 is being cut by Rs 7 lakh to Rs 1.8 crore. The CLA 200 price in Kolkata and Bhubaneswar could come down by nine per cent or Rs 2.7 lakh to Rs 30.3 lakh.
Mercedes will absorb the impact. “We have decided to pass on the GST benefits at an earlier stage at our cost. This approach will benefit customers who want to purchase a locally produced Mercedes-Benz from now on and during June,” said Roland Folger, managing director and chief executive, Mercedes-Benz India. The benefits are not available on completely built imported cars, which account for about 15 per cent of the company’s sales in India.
Folger hoped the implementation of GST will drive growth in the luxury car market, which was flat last year. Mercedes saw a marginal decline in India sales volumes to 13,231 units in 2016.
BMW is offering reduced rates of interest, complimentary insurance, assured buyback schemes, complimentary service and maintenance on its vehicles till June 30. A company spokesperson said BMW did not cut price but is offering these benefits which are more attractive than the price cut anticipated on account of GST. Vikram Pawah, president of BMW Group India, said GST will strengthen and foster growth in the country and benefit consumers at large. A spokesperson for Audi did not respond to call.
The implementation of GST is expected to result in small price increase of entry-level cars while bigger cars and SUVs (sports utility vehicles) would see a reduction. In the case of bigger cars, the cumulative incidence of central and state taxes are estimated to come down from 54 to 43 per cent. Luxury cars account for just one per cent of the domestic passenger vehicle market where three million units are sold annually.