Typically, the cost of a car is determined by factors such as input costs and the supply chain. However, in the case of luxury cars in India, the largest factor contributing to their high prices is the steep import duty imposed by the Indian government, which can be as much as 100%. This makes luxury cars affordable only to the wealthy elite.
In India, the sales of exotic cars are relatively low compared to more developed countries, with some brands selling only single digits per year. As a result, many car manufacturers prefer to import their cars as completely-built-units (CBUs) rather than setting up their manufacturing base in India.
Although reducing import duties could lower the prices of exotic cars, local car manufacturers express concerns that it could negatively impact their business. While this argument has some merit, the Indian government is bound by international trade agreements, which may eventually limit the protection afforded to local players.
Recent news suggests that cars, particularly luxury cars, are expected to become more expensive in the coming years due to the implementation of the Bharat Stage 6 norms by the Indian government. Compliance with these regulations will require the installation of new equipment in cars.
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