Luxury carmakers Mercedes-Benz, BMW and Lexus on Wednesday said prices of some of their luxury vehicle models will go up following a hike in customs duty on certain fully imported vehicles in the Budget 2023-24. Prices of imported vehicles with invoice value less than USD 40,000 are expected to go up by around 2 per cent with Finance Minister Nirmala Sitharaman proposing to increase customs duty on such vehicles from 60 per cent to 70 per cent in the Union Budget 2023-24.


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Customs duty on vehicles in completely built units (CBUs) costing less than USD 40,000 or with engine capacity less than 3,000 cc for petrol-run vehicles and less than 2,500 cc for diesel-run vehicles has been raised from 60 per cent to 70 per cent, as per the Budget document.


Similarly, customs duty on electrically operated vehicles in CBU form, other than with cost, insurance and freight (CIF) value of more than USD 40,000, has also been raised to 70 per cent from 60 per cent. The Budget also outlined that customs duty on vehicles, including electric vehicles, in Semi-Knocked down (SKD) form will rise to 35 per cent from 30 per cent earlier.


Already, cars imported as CBUs with CIF more than USD 40,000 or with engine capacity more than 3,000 cc for petrol-run vehicles and more than 2,500 cc for diesel-run vehicles attract 100 per cent customs duty.


Mercedes-Benz India Managing Director & CEO Santosh Iyer said the change in basic custom duties is going to impact the pricing of some of the company's select cars like the S-Class Maybach and select CBUs like GLB and EQB, making them dearer. "However as we locally manufacture most of our models, this will not affect 95 per cent of our portfolio," he added.


BMW Group India said the budget focused on long-term growth and comprehensive development. "The relaxations for e-mobility production, announcements regarding scrappage policy and National Green Hydrogen Mission will play an important role in a sustainable future. However, the increase in customs duty will impact sales of few of our models," Vikram Pawah, President, BMW Group India, said.


Similarly, Lexus India President Naveen Soni said based on the increase in duties suggested in the Union Budget, the company may have to adjust the prices of a few of its models. The company will, however, continue to take significant steps towards the goal of zero emissions by actively contributing to society at large, he added.


Deloitte India Partner Rajat Mahajan said global MNCs who are banking on buoyant consumer demand in the premium and luxury space will be affected. "The ex-showroom price after loading top GST bracket for cars and accounting for margins, can go up by 1-2 per cent if the OEM passes this in entirety," he added.


Icra Senior Vice President & Group Head Corporate Ratings Shamsher Dewan said the increase in customs duty is unlikely to have a material impact as most of the luxury cars are now assembled in India, barring the top-end variants. Nonetheless, an increase in customs duty will further aim to promote domestic manufacturing going ahead, he added.