Triumph will stop CKD assembly if govt hikes customs duty again

Mumbai: In a move that could be a setback to Prime Minister Narendra Modi’s ambitious Make in India programme, the local subsidiary of British motorcycle maker Triumph Motorcycles Ltd said it would discontinue assembly operations for its bikes in India if the government raises customs duty on completely knocked down (CKD) kits any further.

Triumph Motorcyles India Pvt. Ltd will fall back on importing motorcycles from its Thailand manufacturing facility as completely built units (CBU), using India’s free trade agreement (FTA) with the country, managing director Vimal Sumbly told reporters on Wednesday.

“If the government keeps penalizing CKD, most automakers—including Triumph—will lose out on an effective 5.7% of their turnover (including the revised cess), which is not a small amount of money at the end of the day. It’s not the correct strategy,” Sumbly added.

In the budget for 2018-19, finance minister Arun Jaitley hiked the customs duty on CKD imports of motor vehicles, including motorcycles, from 10% to 15%, along with a hike in duties on specified parts of these vehicles to 15% from 7.5%.

Under the CKD route, components of a vehicle are entirely imported to be assembled locally.

The move assumes significance in the backdrop of US President Donald Trump criticising India at various international trade forums for hiking duties on motorcycles sold by Harley-Davidson Motor Co. India Pvt. Ltd—the local subsidiary of iconic American motorcycle maker Harley-Davidson Inc. Harley assembles its Street models at is Haryana facility.

The maker of the Bonneville classic motorcycle, which began its India operations in 2014, imported close to 90% of the models it sold in India from Thailand until 2016 when it flipped its assembly operations on their head to assemble over 90% of its bikes locally at its Manesar facility.

This move was a stepping stone to eventually manufacture Triumph’s entire portfolio locally as it achieved the desired volumes, Sumbly said.

The duty paid on imports from Thailand via FTA is 10% at present.

The company could reconsider importing from Thailand since “importing through the FTA would be most beneficial and logical for most automakers given the current structure”, Sumbly said.

“Why would you invest in infrastructure and manpower, and go through compliance and homologation in India when you can just bring the bike straight from another country without hassles... It would be illogical for the parent company to approve more investment in India because we expected the government to be fair, but that has not happened,” he added.

The bike maker has written to the ministry of finance but has not received a response yet, Sumbly said.

As a result of the hike, the company has increased prices across its entire range by over 5% in the past week as it already “took multiple hits like the goods and service tax (GST)”.

However, Triumph remains optimistic on India’s luxury market growth story, and plans to “continuously strengthen” its product portfolio, with two more brands to be launched by the end of June. Triumph presently sells 15 of its 27 global brands here with plans to add four more brand lines in the next six to eight months.

Three new dealerships are expected to be operational in Goa, Mangalore and possibly Coimbatore within the year, with the aim to take the total dealership count to 25 from 15 over the next two to three years, Sumbly said.

“We are betting huge on India as it will be a large market for us over a period of time. The country has the largest youth population, so the potential is huge”, he added.

The company also plans to double volumes to 1,700-2,000 units over the next three years with its comprehensive portfolio of cruisers, adventure, sports and classic motorcycles.