According to GST – Your dream car is a sin! – You may be wondering what this means. But this is surely the core reason of why the luxury car market is reluctant to trade in India.
First, let’s talk about luxury Cars
These are cars which please the senses of people, be it the owner or someone else. Apart from that, they also offer extra comfort with high-quality services, which the cars tend to provide to its owner.
The demand for such cars increased during the past few years, when the standard of living of many Indians, increased. But then GST hit the market, and the market saw a drastic fall in the last year. This is because the luxury car segment attracts the highest tax rate under GST.
Here’s what GST did to it
Let’s talk about the leading category in the luxury car market, Mercedes. The sales saw a voluminous increase, which was upto 12 percent, in the first half of 2018. But then, the volume sales declined by 8 percent in the second half, and even worse happened in the first quarter of this year, where the sales declined by 15 percent.
The CEO of Mercedes has something to say!
The MD and CEO of Mercedes, Martin Schwenk says that the Indian market is very complex for doing business. With the introduction of GST and the increased import duties, there is a decline in demand from the consumers’ end, due to higher prices.
Even for localizing the manufacture of components, to escape the import duties, there must be volume. With the increased tax rates, the volume becomes low, and it is difficult to do localization of parts.
The sales remained declined, even when the company absorbed the higher cost of the engine upgrade to BS6 regime because the company did not want to burden the customers with the hiked price.
Where’s the Silver Lining?
Like there is a silver lining to every dark cloud, the company expects that the sales would increase in the next half of this year, during the festive season.
Alongside, the government has decided to skip the BS5 emission norms and has advanced the rollout to the BS6 norms to April 2020. Given the uncertainty of the policy, the companies are hesitating to do business in India. But the Mercedes-Benz MD said that if they were given sufficient time to migrate to new regulations, they could perform impeccably in the Indian market, which would be good for the Indian economy as well.