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BMW assemble engines in India to thwart CKD cars price hike

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Since April this year, BMW has begun assembling operations of engines for their 3 and 5 Series cars, and X1 SUV’s at the Chennai plant.  This was undertaken due to new taxation laws prevalent, and to circumvent higher customs duty of 30% which obviously would have been passed onto buyers, in return making BMW premium cars a lot more expensive.

Dr. Andreas Schaaf, Indian President of BMW spoke to the press at the unveiling of the Efficient Dynamics concept car, and informed them that since the company’s complete knock down(CKD) operations were keeping to the new tax rules, which thereby means the company is paying only 10% duty, and there would not be any hike in prices.  The Government of India has sought a 30% discount on preassembled engines, gearboxes and transmissions, whereas the initial 10% is still levied o other parts.

Present at the event was Praful Patel, Heavy Industries and Public Enterprises Minister and he mentioned that the ministry had spoken to the Finance Ministry regarding a 2 year reprieve until full compliancy to the newly announced CKD norms to come into being. Though BMW already meets compliance terms, Dr. Schaaf does opine that these changes should be gradual rather than sudden and supports Society of Indian Automobile Manufacturers (SIAM) in regards to requesting a timeline extension in order to increase local manufacturing before customs duties are hiked or to reduce the duties that are newly levied.

In regards to cars from the BMW India platform, 50 per cent engine assembly happens in the country and hence, they’re slotted as local production. BMW India would in time opt for complete manufacturing of vehicles in the country when they reach a higher sales volume. BMW Delhi ex-showroom SUV X1 pricing starts at Rs. 22.4 lakhs and the 3 and 5 Series are priced at 24.4 lakhs and 37.6 lakhs respectively. BMW India sold 6,246 cars last year, and went on to retain their leadership in the premium cars segment for a second year in row. June 2011 will see BMW India begin SUV X3 assembling at the Chennai plant.