Globally, Mercedes-Benz stepped into Q3 2017 with the right foot forward at double-digit growth, and best July sales with 181,791 vehicles sold to report 11% global growth. Sales in the Asia-Pacific region grew by 22.7% with 70,266 Mercedes-Benz automobiles sold. Mercedes-Benz India sales growth was reported at 20.9% for July 2017. Growth is in part attributed to the introduction of GST.
However, things took a more undecided turn over the weekend with the Goods and Services Tax Council deciding bring about changes to the previously announced GST announcement in regard to SUVs and luxury cars. The proposed increase in rates though not immediate will be in effect soon. Proposed hike on SUVs should counter a situation wherein hybrid vehicles are taxed as much as more polluting vehicles. Higher taxes will mean a higher compensation fund to negate losses.
Roland Folger, Managing Director & CEO, Mercedes-Benz India
The proposal to increases taxes on luxury cars and sport-utility vehicles (SUVs) could contain Mercedes-Benz India sales and effect the company’s expansion plans here. Frequent policy changes makes planning difficult. Goods and services tax (GST) replaced a number of taxes by clubbing them together on 1st July, 2017. GST saw taxation fixed at 18% in most instances, and an added 15% depending on vehicle type. Last week a decision was taken to raise the additional levy from 15% to 25%.
Roland Folger, MD & CEO, Mercedes-Benz India expressed disappointment in the new amendment, which deters growth in the luxury cars market, and thereby revenue generation. He added, ” By making better technology more expensive, the Government is causing more damage to the environment and slowing down the overall growth pace of the country’s economic growth, which it is striving to achieve.”< Roland Folger, Managing Director & CEO, Mercedes-Benz India and Piyush Arora, Executive Director, Operations, Mercedes-Benz India with ‘Made in India’ GLC
For long, luxury cars and SUVs were the most taxed segments with a need for tax reform. Prior to GST, taxes varied depending on which state a purchase was made in. Provision rate revision and hike after a month of implementation doesn’t consider market performance. Proposed increase in Cess and increased road tax rates will now make luxury vehicle more expensive than they were prior to GST coming into effect.