Indian Government: CKD Duty structure not changing; Onus on automakers now!

Mercedes Benz E-Class Sedan

German Chancellor Angela Merkel’s visit to India last week brought a long list of demands from Germany one of which was the reduction of the CKD duty that the Indian government had hiked from 10% to 60% during the 2011 Union Budget, after finally settling for a 30% duty on CKD assembled cars as automakers protested vociferously at the sudden and unexpected change.

This time around, the Indian government has stood it’s ground and reiterated that it will not reduce the CKD duty structure from the existing 30% for CKD cars whose engines and transmissions are not assembled in India. On the other hand, the engines and transmissions which arrive from abroad and are assembled in India will be levied the older 10% duty structure. Here’s what an Indian government official had to say.

After all, were are trying to plug a loophole that was resulting in the government losing several crores of rupees. So, there is no question of reviewing it.

Audi Q5 Crossover SUV

So, it leaves most auto makers no other option but to assemble the engines and gearboxes in India, employing more Indians at their manufacturing facilities in India, if they want to price their products competitively. BMW India has been at the forefront of the local assembly of the engine and transmission of all it’s CKD cars and will thus required to pay only 10% duty, making BMW cars more competitive when it comes to pricing.

Other automakers, particularly the German ones, like Mercedes Benz and Audi, who were sitting on the fence thus far are also expected to follow BMW India’s footsteps and kickstart local assembly of engines and gearboxes used by their car models assembled through CKD form. In a way, this is very encouraging news for India as this move from the Indian government would result in more jobs being created in the country, just as the Automotive Mission Plan of 2006-16 has envisaged.

So, expect announcements soon from the likes of Audi, Mercedes Benz and even Jaguar-Land Rover, who incidentally happen to the principal automakers carrying out CKD operations in the country. Also, motorcycle makers like Bajaj Auto Limited and Garware Hyosung might also explore this route to price their products more competitively.

Via TheTimesOfIndia

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