Reduction In Cess To Go Long Way In Expanding Luxury Car Segment In India: Mercedes

Mercedes-Benz has sought reduction in cess on luxury vehicles in India in order to grow the premium car segment in the country, a top company official said.

The German automaker, which remains cautiously optimistic about its sales outlook in the country next year, said a reduction in cess would help the luxury car segment in India attain critical mass in terms of volumes.

"We would not expect short-term policy changes in taxation which has been a long standing demand of the auto sector. However we would strongly recommend to reduce the additional 20-22 per cent cess which is levied on our products, on top of 28 per cent GST," Martin Schwenk, managing director and chief executive officer at Mercedes-Benz India, told PTI in an interview.

While the auto industry has lived with the 28% goods and services tax regime, which still is very high, the reduction in the additional cess should be closely looked at and reconsidered which will go a long way in attracting new customers and drive affordability of premium and luxury cars in India, he said.

At present, automobiles attract a GST of 28% with additional cess ranging from 1% to 22%.

"From a policy perspective in the mid-long term, we would ask for further harmonisation of vehicle regulations and working on international trade agreements (with EU) to promote export and import potential of vehicles and their parts," Schwenk said.

This would be beneficial in fundamentally making the luxury segment grow strong and become mainstream, by attaining a critical mass from the current low volumes, he said.

"For India to become a manufacturing hub also for luxury vehicles, we need a substantially bigger domestic market," Schwenk said.

Commenting on sales projections for the next year, he said the company is highly optimistic at the same time cautious about its 2021 outlook.

"The customer sentiment has gradually been improving and we are satisfied with our current sales momentum in November and December. Business sentiment has improved, and there has been increased liquidity in the market, that is a positive sign for retail financing," Schwenk said.

The overall outlook of 2021 for Mercedes-Benz India is hence substantially better than 2020 and the company would back it up with new products and innovations in doing business, he noted.

Schwenk said there will be a continued focus on digitisation drive which accelerated during the pandemic.

"We will focus on further strengthening our online sales which currently comprise up to 15-20% of our sales volumes. Be it sales, customer service or even production, digital will have a strong footprint across and will be the next mainstream transition for the automotive industry and the company wants to play a leading role in that transformation," he said.

In terms of product launches, the company plans to introduce various models next year starting with the new A-Class Limousine and the all-new GLA, Schwenk said.

"Though the pandemic has caused unparalleled personal, social and economic disruption, I believe the economy will create new opportunities backed by macro trends like lower interest rates, and higher levels of consumption," he said.

At the same time increased government spending on infrastructure projects, and focus on the manufacturing sector will boost the economy and put it back on the growth track, Schwenk said.