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Luxury cars to turn costlier as customs duties go up

Cars to cost more

Prices of luxury cars such as Mercedes-Benz, Audi and BMW could go up by anywhere between Rs 30,000 and Rs 1.3 lakh as the cutoms duty on auto parts has been hiked by 5 to 7.5% in the Union Budget announced on Monday.

Finance Minister Nirmala Sitharaman said the increase in customs duty on some auto parts to 15% will bring them at par with the general rate on such components. The move is aimed to give a fillip to the "make in India" drive.

Industry insiders said the impact of the hike in customs duty by 5 to 7.5% will be the highest for carmakers who import completely knocked down parts of their models and assemble them in India. Car parts such as engine, gear and brake components, safety glass and wiring that were being imported will also turn costlier.

The prices of some imported models are expected to go up by up to 2.5%.

"The increase in auto component duties is unexpected in such a revival period, and it will increase the production cost, leading to higher cost for consumers," said Martin Schwenk, managing director and CEO of Mercedes-Benz India.

However, he also said, "the decision to spend more on infrastructure in the union budget despite the high fiscal deficit, will boost the overall economic revival and we should see positive impact on the passenger vehicle market."