Imported cars will cost Rs 20-40 lakh more!

The finance minister's Budget proposal to increase Customs duty on imported vehicles will mean that they would have to fork out an additional Rs 20 lakh (Rs 2 million) to Rs 40 lakh (Rs 4 million) to own swanky toys like the Ferrari, Porsche or Lamborghini, etc.

In simple terms, there would be a rise of nearly 20-25 per cent on the earlier sticker price of these imported vehicles.

This increase, dealers and experts say, will lead to deferment in purchases, or even cancellations. 

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Even as a general hike was effected across all vehicles sold in India through an increase in excise duty, the impact of the proposed move would be the most for imported luxury cars and sports utility vehicles (SUVs) brought into the country.

In the Union Budget, Customs duty on completely built units of cars, SUVs and multi-utility vehicles (MUVs) costing $40,000 (Rs 20 lakh) or above and having engine capacity of more than three litres in case of petrol and 2.5 litres in case of diesel variants was increased from 60 per cent to 75 per cent.

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As many as 500-600 vehicles in this range are imported into the country every year and this market is growing at a comfortable clip of over 30 per cent annually.

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Company-appointed dealers of Ferrari, Rolls Royce and Lamborghini, operating in Delhi and Mumbai, say, besides this duty increase, addition of other taxes and local levies would take the final price increase to 20-25 per cent.

Iconic Italian supercar maker Ferrari, for instance, has increased the price of its entry-level model California to Rs 2.69 crore from Rs 2.2 crore in India.

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The price of its top-of-the-line model Ferrari FF has shot up by 21 per cent from Rs 3.42 crore to Rs 4.12 crore.

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Ashish Chordia, chairman, Shreyans, the authorised Ferrari dealer, said: "The increase in duties on luxury cars is definitely a surprise move.

It is early to gauge the impact on sales, but considering a luxury car is not a necessity purchase, it might lead to clients deferring their purchase, even if they don't cancel those."

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Fellow Italian luxury and supercar brand Lamborghini, owned by Germany's Volkswagen, has also jacked up prices of its models between Rs 20 lakh and Rs 40 lakh.

Other ultra luxury brands like Aston Martin, Rolls Royce, Porsche, Maserati, Bentley and some models of Mercedes, BMW, Audi, Jaguar-Land Rover and Toyota have also raised prices.

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The increase in duties could also lead to some cancellations because even those customers who had placed orders for such vehicles earlier would now have to pay according to the revised prices list.

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Normally, there is a time gap of four to eight months between the date of booking and the date of delivery of these luxury cars.

This period includes the time required to customise a vehicles according to the wishes of a customer.

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Mohan Mariwala, managing director, Auto Hangar, says: "This is an extremely disappointing move by the government, as it comes at a time when the market is going through a lean season.

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The 15 percentage point increase in duty will mean an increase of between Rs 20 lakh and Rs 40 lakh. The buyer of these cars are high net worth individuals.

The short-term impact will surely be there and buyers' decision will get affected."

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Auto Hangar, which sells the Mercedes range, is also the authorised dealer for all Lamborghini cars and is due to open a showroom at Prabhadevi area of Mumbai by May.

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Lalit Choudhary, managing director, Performance Cars, which is the authorised dealer for Aston Martin, said: "The demand for such luxury cars will ultimately take a hit.

We are talking to our customers regarding the increase, which is in the range of Rs 20-35 lakh for Aston Martin.

We hope that the market will absorb the price rise eventually." Aston Martin has so far seen sales of 30 units in India.

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Ferrari, which was to open its second outlet in Mumbai in the second half of last year, has now postponed the launch to the third quarter of this year.

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Though an official from the company authorised to sell Ferraris in India did not say whether there would be an impact on demand, market experts say the increase will impact offtake of the Italian car brand.

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In the June-December 2011 period, Shreyans, took bookings of 20 Ferrari units from its Delhi outlet. Rolls Royce last calendar year sold 70 units.