Mercedes-Benz India today said it will hike prices of its vehicles by up to Rs 5 lakh from March 15 in order to offset the impact of infrastructure cess and luxury tax proposed in the Union Budget 2016-17.
The price increase would be between 3 per cent and 5 per cent depending on the model, leading to a price hike between Rs 1 lakh and Rs 5 lakh.
In India, the German luxury carmaker sells models ranging from A Class to Maybach, priced between Rs 28 lakh and Rs 1.67 crore (ex-showroom price).
Elaborating on the need to go in for price hike, the company said: “The imposition of an infrastructural cess as well as an additional luxury tax announced in the Union Budget 2016, has negatively impacted the prices of the Mercedes-Benz model range.”
In addition, a weakening currency coupled with rising input costs has been exerting significant pressure to the bottom-line, it added.
The combination of all these factors led Mercedes-Benz India to upwardly revise the prices of the entire model range, the company said.
Hitting out at the Budget proposals, Mercedes-Benz India Managing Director & CEO, Roland Folger said: “Contrary to our expectation of some relief in terms of rationalisation of duties, the introduction of additional duties and taxes in this years Union Budget has adversely affected our pricing.
“On top, the steady rise of input costs against the backdrop of a weakening Indian currency has further eroded our bottom-line.”
The company is hence left with no option but to make some necessary price adjustments to its product range, in order to protect our investments to provide an unparalleled brand experience to customers, he added.
“Needless to mention, we were expecting some rationalisation of the duty structure in the Budget, which could have benefited both the luxury car industry and the end customer in multiple ways. On the contrary, we now have the challenge of addressing additional taxation,” Folger said.
Yesterday, Tata Motors hiked the prices of its passenger vehicles in the range of Rs 2,000 and Rs 35,000, while Hyundai Motor India and Honda Cars India have also stated their intention to raise prices in the range of Rs 3,000 to Rs 80,000 on their respective product portfolios.
The government has decided to impose 2.5 per cent cess on diesel vehicles of length not exceeding 4 meter and engine capacity not exceeding 1,500cc, while higher engine capacity and SUVs and bigger sedans were slapped with a cess of 4 per cent on the value of the car.
These are over an above a cess of 1 per cent on petrol/ LPG/CNG driven vehicles of length not exceeding 4 meter and engine capacity not exceeding 1,200cc.
Jaitley also proposed “to collect tax at source at the rate of 1 per cent on purchase of luxury cars exceeding value of Rs ten lakh”.