No premium cars in India

By The SUV you just bough | 24 May 2003


Mumbai: If you are gearing up to buy the latest premium sports utility vehicle (SUV) or sedan in the market and feel that you will be the proud owner of a real blue-blooded luxury car, there is news for you.

SUVs like the Suzuki Grand Vitara, GM Forester and Honda CR-V and sedans such as the Honda Accord and Ford Mondeo, which are being sold as luxury vehicles in the Indian market, are actually mid-priced vehicles catering to middle-class families in US markets.

This is mainly due to a huge customs duty (about 98-100 per cent) component imposed in India on imports of vehicles in completely built-up (CBU) form, leading to a near-doubling of its actual price in the market.

This has led to a chicken-and-egg situation where carmakers say they will start manufacturing the cars in India only when there is a sufficiently large market to justify the huge outlays involved. On the other hand, the market for these vehicles remains stagnant as their prices keep them out of the reach of most people like us.

There does, however, exist a minuscule market for the luxury cars as they are called and car manufacturers operating in India are now directly importing them for those who don't mind paying the extra duties to make that 'lifestyle statement.'

While carmakers have a point in their assertions, customers do have a choice. It also makes sense to research the market carefully to decide if the premium car model you are buying has a premium position in global markets. The domestic market at the moment has a number of SUVs and sedans to make the choice a little difficult.

Among the 10 SUVs sold in the Indian market five makes are imported as CBUs, of which the latest to hit the market will be the Hyundai Terracan in July 2003. The others GM Forester, Honda CR-V, Mitsubishi Pajero and Suzuki Grand Vitara are already being imported. Most of these are priced in the range of Rs 15 lakh to Rs 22 lakh.

The following table gives the prices the vehicles (same make and model) command in the US and the Indian markets respectively:

Make and model Price in US Price in India
Sports utility vehicles    
Honda CR-V Rs 9- Rs10.5 lakh ($18,900 - $22,400) Rs 15-18 lakh
Suzuki Grand Vitara Rs 7.5-8.5 lakh. ($18,599 - $19,799) Rs 16-18 lakh
GM Subaru Forester Rs 10-12 lakh ($20,845 - $24,095) Rs 18-20 lakh
Hyundai Terracan/ Santa Fe Rs 8-Rs 12 lakh (17,549 - $24,999) Rs 18-20 lakh
Mitsubishi Pajero/ Montero Rs 15- 18 lakh (32,487 - $38,397) Rs 18-22 lakh
Toyota Corolla Rs 6.3-Rs 6.9 lakh (13,570 - $14,680) Rs 9-Rs 11 lakh
Toyota Camry Rs 9 -12 lakh ($19,045 - $25,405) Rs 18 -22 lakh
Mitsubishi Lancer Rs 6-Rs 7 lakh ($14,017- $16,047) Rs 9 lakh
Honda Civic Rs 6-Rs 9,6 lakh ($13,010 - $20,510) NA
Honda City NA Rs 8-10 lakh
Honda Accord Rs 7-Rs 13 lakh ($15,800 - $27,800) Rs 15-Rs 17 lakh
Hyundai Sonata Rs 7-Rs 8 lakh ($15,499 - $18,574) Rs 13-Rs 15 lakh
Hyundai Sonata V6 Rs 8-Rs 9 lakh ($16,709- $18,574)  
GM Vectra NA Rs 17 lakh
The premium cars in global markets include the BMW, Audi, Toyota Lexus, Jaguar, while the Rolls Royce, Bentley, Fiat Ferrari, Fiat Maserati and the Alfa Romeo qualify for the super premium bracket.

Buyers in India pay almost as much for a Ford Mondeo or a Honda Accord as a buyer in the US pays for base versions of a BMW, Audi, Jaguar or a Toyota Lexus. The BMW 3 Series in the US market comes in the range of Rs 13-Rs 20 lakh ($27,800-$42,900) while the Jaguar X Type comes in the range of Rs 13.7 to Rs 17 lakh ($29,305-$36,305).

The Toyota Lexus ES 300 is available for Rs 15 lakh ($31,725) while the IS 300 model comes for Rs 13.8-14.4 lakh ($29,435-$30,805). On the other hand prices of cars manufactured in India such as the Mitsubishi Lancer, GM Corsa, Astra, Honda City and the Hyundai Accent are on par with their prices in global markets.

Compare cars such as the Lancer and the Esteem with the Toyota Camry or the GM Vectra, and one finds that the latter's technical specifications do not actually justify their prices in India. The Lancer at Rs 7-8 lakh comes with a 1.5-litre, 87-bhp engine while the Esteem at a price tag of Rs 5-6 lakh comes with a 1.3-litre, 85-bhp engine and the GM Corsa with a 1.8-litre, 92-bhp engine comes priced at Rs 6 lakh.

On the other hand, the Toyota Camry at Rs 18-Rs 20 lakh comes with a 2.3-litre, 147-bhp engine while the GM Vectra with a 2.2-litre, 145-bhp engine comes for Rs 18-20 lakh. Contrast this with the BMW 5 Series base model at Rs 17 lakh ($37,000) equipped with a 2.5-litre, 184-bhp engine. The BMW 5 Series high-end model comes priced at $54,000 (Rs 27 lakh), which comes with a 4.4-litre, 290-bhp engine with other technical specs and dimensions to suit.

The premium sedan Audi A4 (base model) comes equipped with a 1.8-litre, 170-bhp engine priced at $24,000 (Rs 11-13 lakh). Other cars like the Jaguar and the Lexus also come with similar technical specs and prices.

Cars in the UK and European markets are more expensive than in the US because of higher taxes but are still slightly cheaper than in India. This pricing anomaly can only be resolved if the government reduces customs duties on cars bought in a CBU form or car manufacturers convert India into a global manufacturing hub to cater to global markets, like Hyundai Motor India is planning to do.

With the manufacturing sector currently in doldrums such a scenario seems highly improbable.

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