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In what could be a major setback to India’s image as a ‘friendly foreign territory’ for investment, the German luxury car maker, Audi has threatened that the company may ‘scale back’ investments and even ‘pull out’ from the enticing Indian automobile market.

The auto major can go that way if the government plans to go ahead with its budget proposal which may change the whole definition of completely knocked down (CKD) cars resulting in a heavier import duty burden.

The first report about this recent development reaching here suggests that the German auto maker was concerned with the budget proposal and was awaiting clarity over the matter.

Of course, it can be an option. We cannot rule it out,

Peter Schwarzenbauer, Audi’s global sales and marketing head was quoted as saying on the current situation.

The size of the Indian luxury car market was small at this moment, and the new rules, if they are implemented, could force the company to wait for the market to develop further before it thinks about expanding. As a result, we have to check out the options available.

He was further quipped as saying as to what could be the options.

Providing you an insight into what happened, the budget provision stipulated a change in the definition of CKD cars which can increase the import duty from a comfortable 10% to a pinching 60%. Thus, it has acted as a party pooper to the boom in the luxury car sales.

If the new provision comes into picture, there could be an over Rs. 8 lakh hike in the prices of entry-level cars of luxury car makers like Mercedes, BMW and Audi and put alarm bells ringing for them.

Various industry analysts all over the country are of the opinion that the import duty shall be kept at the same rate so that higher-end technological products could be imported easily and made available to the general public without being forced to charge too much margin on them.

It shall be interesting to see if government is going to review its decision to help Indian automobile market keep receiving high technology products or implement its recent decision.

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