Mumbai: Mercedes-Benz India Pvt. Ltd will soon sell its S-Class sedan with a locally assembled engine, after the government raised customs duty on import of pre-assembled parts from 10% to 30%.
“We are implementing all measures to ensure we have lower duty for the S-Class,” chief executive and managing director Peter Honegg said at the launch of a special edition of its flagship car.
The S-Class with locally assembled engines will be available in the next four-five months.
Luxury car makers such as Mercedes-Benz, BMW India Pvt. Ltd and Audi India Pvt. Ltd import completely built-up engines for some models while other parts are assembled in the country. The engine forms at least 15% of a car’s cost.
BMW India had said in May that it has started assembling engines of 3 and 5 series sedans and sports utility vehicle X1 at its Chennai factory from April to avoid the higher customs duty.
The engines for the Mercedes C-Class and E-Class are assembled by Force Motors Ltd, which will also assemble the S-Class engines.
“The government’s decision is costing us lot of money,” Honegg said. “The government should have given some time. Typically, it takes eight to 10 months for a new line to be up and running.”
Because of the additional 20% duty levied on imported engines, Mercedes-Benz has been incurring a loss of at least Rs10 lakh on the sale of each S-Class car, sales and marketing director Debashis Mitra said.
Carrying a ticket price of Rs83,99,493, ex-showroom Mumbai, the S-Class competes with the BMW 7-Series and the Audi Q8.
A proposal in India’s national budget presented on 28 February raised customs duty from 10% to 60% on pre-assembled parts such as engines, on par with completely built imported units.
The duty was later halved to 30% after car makers opposed the move.