Despite high taxes, Indians are fond of luxury cars (Part.2)

India has one of the highest tax regimes in the world for imported CBU (completely built units). "All imported cars or CBUs above CIF value (cost, insurance, and freight) of 40 000 USD attract 110% basic customs duty in addition to up to 50% GST (goods & services tax) in India", explains Santosh Iyer, MD & CEO, Mercedes-Benz India. Over and above these taxes are a bunch of other variable taxes - like road tax and registration costs that are applied after the CBU is imported into India.

Luxury sports car maker McLaren opened its first dealership in India late last year with Infinity Cars, one of India's leading luxury car dealership groups that also sells Lamborghini & Porsche cars. Its chairman and managing director, Lalit Choudary, explains how India's high import taxes impact the price of a luxury sports car for a buyer in India "If a McLaren GT costs about £100K retail price in the UK when imported to India as CBU, it may cost around £300K or £320K including just the freight and import taxes".

But why does India have such high taxes? "CBUs imported into India have more taxes because our country wants to promote local manufacturing." reasons Renuka Kriplani, a veteran auto journalist from India. Elon Musk shelved plans to launch Tesla in India late last year after several failed attempts to score lower taxes (according to a report by Reuters). The EV brand wanted to test the Indian market by importing EVs built in the US and China on discounted import taxes before setting up a plant in the country. "I don't think our government is wrong in not offering sops to Tesla. They are saying if you want to come here and set up a plant, you will get the same duty rebate as the rest of the brands", she adds.

Are high taxes a speed bump for luxury car buyers in India? "Not for true auto enthusiasts," answers Boopesh Reddy (Brengarage on Instagram), an entrepreneur & sports car collector with one of India's most envy-worthy car collections. "When something is your passion, you will invest in it even if it is expensive. Of course; it pinches when you compare the costs with other countries". Reddy's carefully curated collection includes the limited edition Mercedes-Benz AMG GT Black (only 1 700 in the world), Ferrari 488 Pista Spider, and Lamborghini Aventador SVJ, to name just a few. "It took me a while to gather the courage to start buying these cars," he confesses, "I always thought, what will society say and what will my parents think? Am I spending too much money on performance sports cars or luxury cars?"

India has also always been a price-sensitive market, unlike other markets in Asia that are very brand conscious, notes Kriplani. "In India, we are a market that looks for value for money, whether it's an INR 10 Lakh (1 200 USD) car or an INR 60 Lakh (73 000 USD) car."

The conservative perspective towards luxury spending is rapidly changing in India now, reckons Choudary, "Covid changed the mindset on consumption. People are eager to spend. Earlier people were overly conservative in spending in certain categories". Reiterating Choudary's sentiments, Santosh Iyer, CEO of Mercdes-Benz in India, adds that more young, successful Indians are spending on luxury goods and services, “be it luxury holidays, luxury clothing, high-end watches. We now see 10-12% of our customers comprise salaried background and young professionals."

Ashique Thahir, co-host of 'Car and Country,' an OTT series on Amazon (UK), drives his electric vehicles daily on India's city roads, "Supercars are definitely usable on Indian roads. I have had a flat tire many times because of the potholes, but one just has to learn to be careful", he confesses adding that the country's city roads could do with an upgrade to accommodate the ever-increasing traffic… Thahir, who lives in India's southern state of Kerala, is a collector of Rolls Royce, Porsche, Lamborghini, and Ferrari cars. "I have clocked over 250 000 Kms driving my cars on the Indian roads", he claims proudly. "In each city in India, the specification of road bumps is different. Sometimes they are car-breakers instead of speed-breakers", quips Reddy adding that the country could make more race tracks for speed lovers like him.

India's infrastructure, particularly the highways, has seen notable improvements in the last few years. About 50 000 kilometers of highways were added in the past nine years. Reddy, who lives in Bangalore, also known as India's Silicon Valley, is definitely taking advantage of this upgrade. "I go early in the morning to the highways and enjoy driving my sports cars for about 2 hours. For my return, I have a truck which picks my car up from the highway and brings it back to the city because I don't want to drive my cars in the bumper-to-bumper traffic on Bangalore city roads", he concludes.