The steep hike in customs duties on completely-built-units (CBUs) from 60 percent to 75 percent in the 2012 Budget has sharply pushed up the prices of imported cars. There has been no increase in tariffs on cars assembled from Completely Knocked Down (CKD) kits. Hence, CKD-built cars attract a much lower duty; a carmaker has to pay 30 percent customs duty on the car provided it comes with a pre-assembled engine, gearbox and transmission. If the components are further knocked down and assembled locally, the duty is only 10 percent.
Among the luxury car brands, Jaguar has been hit the most with this year’s import duty hike as none of its cars are built in India. Its best-selling model, the XF in particular, has a serious price disadvantage against rivals like the Mercedes-Benz E-class, BMW 5-series and Audi A6, all of which are locally assembled.
However, Jaguar plans to set up an assembly operation for the XF in the same facility where the Land Rover Freelander 2 is also assembled. Ratan Tata, in an exclusive interview to Autocar India, said: “We will look at assembling the XF in India if there is a business case for it.” Local assembly would allow Jaguar to launch lower variants like the XF 2.2 to compete head-on with the BMW 520d, Merc E220 CDI and Audi A6 2.0 TDi, which account for the bulk of volumes in the premium luxury car segment.
Jaguar Land Rover combined sold approximately 2,300 cars in 2011. This year, the company is expected to clock close to 2,500 units.