Luxury Car Sales: India and the UK are on the verge of concluding a Comprehensive Economic Trade Agreement (CETA), which is creating a buzz in the luxury car segment. Cleared by the cabinet on Monday, the agreement is set to modify the import duty regime for high-end cars. Consequently, sales of luxury vehicles in India are dwindling, with many bookings being canceled by prospective customers.
Rumors of Duty Cut Stop Bookings
In May, the India-UK Free Trade Agreement (FTA) was announced, which suggested cutting the existing import duty of 75-125% on completely built cars (CBU) to 10%. This news has left rich buyers waiting for purchases. Most of them are waiting to benefit from cheaper prices in the future. Some have even cancelled their present orders for luxury vehicles such as Land Rover, Jaguar, Rolls Royce, Bentley, and Aston Martin.
A leading brand retailer informed the Times of India that buyers are canceling bookings, even after ordering. This last-minute uncertainty is hurting the reputation of the Indian market. Luxury car companies make only a small number of units to ensure exclusivity, and now some of them are diverting their inventory to other nations.
Dealers Worried, Buyers Waiting
Indian luxury car buyers pay nearly three times as much as in the UK market. Besides hefty import duties, local tax and registration fees drive prices further up. Although the initial May announcement of the trade agreement had stimulated buyer interest, the market is now quiet again.
Dealers are attempting to break the news to their customers. According to one dealer, “Purchasing now is not necessarily a loss. The trade agreement will take nearly a year to kick in. In addition, the duty will not exactly fall to 10%; it will taper off over many years, and an annual quota may also be applied.”
Risks of Waiting
The dealers are cautioning purchasers about waiting too long because luxury car prices increase by almost 5% annually. The sliding rupee against the British pound is also causing costs to swell. Before the reduction in import duty is fully effective, purchasers could end up paying more because of yearly price increases and currency fluctuations.
The actual route map for the duty reduction will be known once the deal is inked. In the meantime, both customers and dealers are in suspense regarding when and how the prices will stabilize.