Mercedes, Audi 'disappointed' with proposed hike in cess on luxury cars

NEW DELHI: The joy for makers of sports utility vehicles (SUVs) and large cars will remain short-lived. So it is for prospective buyers of vehicles in these segments. With Centre seeking to increase the cess on these vehicles to correct a so-called "anomaly", prices are set to jump.
According to an earlier TOI report quoting sources , it is expected that the cess will be hiked from 15 per cent to 25 per cent on vehicles belonging to these segments.Currently, the levy on these vehicles, including the 28 per cent GST, adds up to 43 per cent, which will rise to 53 per cent once the law is amended.
Little wonder then that companies like Mercedes have expressed disappointment at what may well be the writing on the price charts. "We are highly disappointed with the decision. We believe this will be a strong deterrent to the growth of luxury cars in this country," said Roland Folger, MD and CEO at Mercedes-Benz India."This decision once again reiterates the need for a long-term roadmap for the luxury car industry, which has been at the receiving end of arbitrary policies." Mercedes in May had announced that the transactional price of its entire locally assembled model range will decrease by 4 per cent on "weighted average".
Rival Audi too is not too pleased."The taxes on this industry were already very high and we expected the unfulfilled potential of this segment to increase after the implementation of GST and rationalization of taxes," said Rahil Ansari, Audi India head, in a statement. "However, the proposal of further increasing the cess on the luxury car industry will dampen the spirits of not only the companies, dealers and customers but also workers and employees working in this industry. This proposed increase in cess will most definitely adversely impact the sales."
For now, the company has announced offers like complimentary insurance and extended warranty on its A3, Q3 and A4 range to possibly offset a likely fall in demand courtesy increased prices.

There was criticism previously of the decision to put luxury cars in a GST bracket that would reduce its price even though hybrid vehicles would cost more. While there is no revision expected on hybrid car prices, the government may be able to deflect some of the protests - including those from several states like Tamil Nadu.