Uncertainty over UK-India FTA timeline stalls sales in India's Rs 2,000-crore ultra-luxury car market
ADVERTISEMENT At stake are British marques such as Rolls-Royce, Aston Martin, Bentley and McLaren besides some models from Jaguar Land Rover like the Range Rover SV or the BMW-made Mini. These brands could see a price reset once the FTA comes into effect, resulting from sharp import duty cuts. That could however take at least 12 to 14 months to happen, analysts and industry experts said, escalating worries at dealerships of such high-end cars already battling deferment of consumer purchases.
A total of 250 ultra-luxury imported cars were sold in calendar 2024, comprising just 0.49% of the total 51,000 luxury cars sold in the Indian market, as per industry estimates. Dealers and executives at super luxury carmakers said, requesting anonymity, that affluent buyers are holding off on purchases in anticipation of lower prices.
Dealers noted a sharp drop in bookings for more than 3000cc petrol-powered vehicles imported as completely built units (CBUs).Consumers are keenly awaiting the FTA rollout.
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Currently, these ultra-luxury cars currently attract import duties exceeding 100%.Under the proposed FTA, duties could drop to about 30% under a limited quota system, translating to savings of 1-1.5 crore per vehicle.
ADVERTISEMENT However, according to an executive at a luxury carmaker, unlike the popular belief, eventually, there won't be a drastic drop in prices."The drop in customs duty from 110% to around 30% won't fully lower car prices. That's because much of the cost-like currency rates, shipping, and transfer pricing rules-is fixed and won't change," the executive said. "Only about 30-40% of the price depends on customs duty. So, even after the duty cut, buyers will see a smaller price drop than expected."
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Tacking buyer hesitationUltra-luxury car brands are scrambling to manage the fallout. Rolls-Royce is offering limited price protection clauses or partial refunds if duties are reduced within six months after purchase - a rare, proactive move that underscores the current level of buyer hesitation. BMW has a similar offer for its Mini 3-Door Cooper S model produced at its Oxford plant in the UK. The company also sells a second Mini model, which is however not covered under the price protection offer as it is imported as a CBU from BMW's plant in Germany.Jaguar Land Rover (JLR), on the other hand, is staying on the sidelines.
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Imported CBUs account for around 7% of JLR's monthly volume of 6,000-6,500 cars in India, making the Tata Motors unit cautious in the absence of clarity on the effective date of the new duty regime, said a person aware of the company's plans."The uncertainty is paralysing both buyers and dealers," said a dealer of imported brands. "We are stuck with duty-paid inventory that may become unsellable overnight, while customers are simply waiting for the price correction. Without clarity, the financial risk is huge."Adding further to the confusion is the ambiguity around whether the proposed 30% duty under the FTA includes or excludes the existing 40% agriculture infrastructure and development cess. If the cess is applied over and above the reduced duty, the benefit to end-customers would be significantly diluted.
EVs may lose charge In addition, the FTA's exclusion of electric and hybrid vehicles from any duty relief for at least five years runs counter to India's clean mobility goals, said importers. With ICE vehicles set to become significantly cheaper, while EVs remain taxed at higher levels, the pricing equation could skew demand away from environmentally-cleaner options.While the FTA will offer a competitive edge to British brands, comparable European ultra-luxury carmakers such as Porsche, Lamborghini, Mercedes Maybach, select AMG models, and Ferrari, among others, are likely to be adversely affected. Without similar duty relief, their models could become relatively costlier, eroding their price-value equation in India's tightly clustered super-luxury segment, said analysts.Spokespeople at Porsche and Lamborghini were not immediately available for a comment.
Santosh Iyer, managing director at luxury car market leader Mercedes-Benz India however remains confident of the brand's appeal and exclusivity.
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Prime Minister Narendra Modi on Wednesday inaugurated Kartavya Bhavan at Kartavya Path in New Delhi, pointing out that many central ministries were functioning from different locations across the national capital, with several housed in rented buildings. He revealed that the government was spending Rs 1,500 crore solely on rent. "Many ministries of the Indian government are being run from 50 different locations in Delhi. Most of these ministries are being run from rented buildings, with an annual expenditure of Rs 1.5 thousand crores. This amount is being spent by the central government just to pay rent," he said. PM Modi pointed out that the country's administrative machinery had been operating for decades after Independence from buildings constructed during the British era. He further highlighted the poor working conditions in the existing buildings, stating that they lacked proper lighting, space, and ventilation. "Can you imagine an important ministry like Home Affairs operating out of a building for nearly 100 years with insufficient resources?" the PM asked. He further said that the newly-inaugurated Kartavya Bhavan is not a mere structure or a piece of infrastructure, but that the seed of Viksit Bharat will be sown from this building. "In the coming decades, the direction of the country will be determined from this building," said PM Modi. Quoting from the Bhagavad Gita, PM Modi said that we must focus more on our kartavya (duty) than on the end result while carrying out our tasks. The ambitious project is aimed at bringing ministries and departments under one roof for efficiency. Kartavya Bhavan-03, the first to be inaugurated, will house the Home Affairs, External Affairs, Rural Development, MSME, DoPT, Petroleum & Natural Gas ministries, and the Principal Scientific Adviser's office. Many key ministries currently function from ageing buildings like Shastri Bhawan, Krishi Bhawan, Udyog Bhawan, and Nirman Bhawan, constructed between the 1950s and 1970s, which are now "structurally outdated and inefficient," according to the government. The prime minister, accompanied by Union Housing and Urban Affairs Minister Manohar Lal Khattar and Ministry Secretary HUA Secretary Katikithala Srinivas, took a tour of the newly constructed building. Srinivas briefed PM Modi about the features of Kartavya Bhavan. The HUA Ministry has plans to construct ten buildings as part of the Common Central Secretariat (CCS) under the government's Central Vista redevelopment project. Two CCS buildings, 1 and 2, are scheduled to be completed by next month, while construction work on CCS 10 will be finished by April next year. The project of CCS buildings 6 and 7 will be completed by October 2026. On Tuesday, Khattar said that offices functioning from the four bhawans will shift to four new locations on Kasturba Gandhi Marg, Minto Road, and Netaji Palace temporarily for two years, while the construction is carried out. A few buildings are currently proposed to be retained. These include the National Museum, National Archives, Jawaharlal Nehru Bhawan (External Affairs Ministry), and Dr Ambedkar Auditorium, which are new buildings. Vanijya Bhawan will also be retained. Under the Central Vista redevelopment plan, the government has already constructed a new Parliament building and the Vice President Enclave, and redeveloped the Kartavya Path that spans from Vijay Chowk to India Gate. Besides the Common Central Secretariat, the government will also construct an Executive Enclave that will house a new Prime Minister's Office (PMO), Cabinet Secretariat, India House, and National Security Council Secretariat. Under the second phase of the Executive Enclave, a new prime minister's residence will be constructed. The plinth area of the Kartavya Bhavan-03 is 1.5 lakh square metres with a basement area of 40,000 square metres. Its parking lot can accommodate 600 cars. The HUA ministry said the Kartavya Bhavan-03 has a creche, a yoga room, a medical room, a cafe, a kitchen, and a multipurpose hall. It has 24 main conference rooms, each with a capacity to seat 45 people, 26 small conference rooms, each with a capacity to seat 25 people, 67 meeting rooms, and 27 lifts. Join our WhatsApp Channel
