Duty axe falls on toys of the rich

There is bad news for the Ferraris, the Lamborghinis, the BMWs and the Audis. The government on Thursday hiked customs duty on imported cars that cost over $40,000 (₹ 22 lakh) from 75% to 100%, which will substantially increase the prices of these cars.

Super bikes and yachts are other toys of the uber rich that have attracted the finance minister's attention.

'There is an affluent class in India that consumes imported luxury goods such as high end motor vehicles, motorcycles, yachts and similar vehicles,' finance minister P Chidambaram said in his budget speech.

'I am sure they will not mind paying a little more. Hence I propose to increase the duty on such motor vehicles from 75% to 100%, on motorcycles with engine capacity of 800cc or more from 60% to 75% and on yachts and similar vessels from 10% to 25%.'

The move has come as a bolt from the blue for the industry, as the sales of luxury cars were already reeling under a slowdown.

'Increase in custom duty for imported cars is surprising,' said Michael Perschke, head, Audi India.

'It will severely impact the auto industry and its growth. We will have to evaluate the impact of this hike on our prices, and have no choice but pass on the increase to the customer.'

'There will definitely be an impact on overall numbers but there is a positive side to it as manufacturers would now think even more about manufacturing the cars locally,' felt Wilfried Aulbur, managing partner, Roland Berger India and a former MD at Mercedes Benz India.