Mercedes-Benz India is working towards selling its S-Class sedan with a locally assembled engine. The company’s move is motivated by the increase in customs duty on import of pre-assembled parts. After the 2011-12 Union budget, the customs duty was increased from 10% to 60%, but was later halved due to stiff opposition by the carmakers.
As the company does not want to increase the price of the S-class which costs Rs. 83,99,493 (ex- Showroom, Mumbai), it is localizing the engine to maintain the cost. “We are implementing all measures to ensure we have lower duty for the S-Class,” Chief Executive and Managing Director, Mr. Peter Honegg said. The company plans to introduce the S-Class with locally assembled engine by the first half of 2012.
While luxury carmakers like Mercedes-Benz, BMW and Audi assemble other parts in India, they import completely built-up engines for certain models. Engine of a car makes up at least 15% of a car’s cost.
Currently Mercedes-Benz is incurring a loss of at least Rs. 10 lakh on the sale of each S-Class due to the additional 20% duty levied on import of the engine, stated Sales and Marketing Director, Mr. Debashis Mitra.
