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Talking Point: Challenging year for luxury car makers
It was a year of mixed fortunes for the automobile industry that faced growth as well as tax, legal and government policy challenges, industry experts said. “It definitely was a challenging year for the automotive sector. The year was marked with market challenges in the form of ‘infra cess’ and ‘luxury tax’ levied in the Union Budget,” says Roland Folger, MD & CEO, Mercedes-Benz India.
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Chennai
The Supreme Court ban (now withdrawn) on high-powered diesel engine cars in Delhi also ensured the loss of the strong momentum gained in 2015, as the Delhi NCR (National Capital Region) comprises 20-25 per cent of the company’s total volumes, Folger said.
“We expect single digit growth for the passenger vehicle segment in 2017 and for luxury car industry it will be in lower double digit,” he said, noting that the Goods and Services Tax (GST) and the ongoing demonetisation would impact the auto industry in the short term with people deferring purchase decisions.
He said taxing the luxury cars in the Union budget and also the proposed clubbing of luxury goods with additional cess in GST would impact the premium car segment.
“Similarly for demonetisation, we are witnessing a short-term impact in some markets. More than 80 per cent of our cars are financed and as a highly compliant company, we any way discourage cash transactions,” Folger remarked.
Terming 2016 as a good year for the industry, Guillaume Sicard, President, Nissan India Operations, said there were few surprises late in the year. “Global sales are solid, and auto industry sales in India are up 10 per cent versus last year, as of the end of November. There are some uncertainties due to the shortterm impact of demonetisation that we need to consider, though,” he said.
On the growth trend, Sicard said entry and mid-range of cars have long dominated sales in the Indian market and is still expanding at a rapid pace in terms of the increase in the number of new models being introduced every year.
Sicard said: “Passenger vehicle sales are projected to grow between 6-8 per cent in 20162017 and we share that vision. Overall, the GDP of the country is expected to grow during FY17, leading to improved domestic demand for cars.”
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