Toyota Kirloskar Motor (TKM) is likely to further delay the launch of its premium brand ? Lexus ? with no set timeline on bringing the luxury car into the country, citing heavy import duty rates and a sluggish market. While the company has been keen to introduce the Lexus range, it has previously indicated that its evaluation of the feasibility of the project has been stymied by the twin challenges of duty-related costs and limited volumes.
?The Lexus project has been delayed due to heavy import duty and the sluggish market. We cannot set a definite timeline as no decision has been taken on the import duty reduction,? Sandeep Singh, deputy MD and COO (marketing and commercial) at TKM said. In March, the government had increased the basic import duty on luxury vehicles to 100%, up from 75% earlier.
Still, the luxury car segment has been bucking the trend in the overall passenger car market which has seen automakers cut down on production days to adjust the inventory levels with demand. German carmaker Mercedes-Benz India posted a 32% growth between April and June on the introduction of new models while rival Audi has said it grew 21% in the half year to June, selling 4,846 cars.
The talk about the Lexus entry into India first surfaced two years ago. Last year, TKM Managing Director Hiroshi Nakagawa had said that the company was putting in all efforts to realise the project but that it was a tough call because of the challenges posed by duty-related cost, investment into showrooms and limited sales volumes.
Meanwhile, other luxury brands such as Jaguar Land Rover and Chrysler either have a presence in India or have made plans for an entry.
Analysts say the ongoing free trade agreement talks between India and the European Union is a potential area of concern for Japanese firms, “They have started discussing the specifics. That is making the Japanese companies concerned because the pricing equation becomes lopsided,” said VG Ramakrishnan, vice-president (automotive and transportation practice), Frost & Sullivan. He added that the still nascent luxury car market in India has the potential to absorb 300,000 units annually in the next six years.
The growth trend in luxury car sales in India is sustainable because the customer base is only set to grow as more people upgrade, said Abdul Majeed, partner, Price Waterhouse. ?Although it may not be big in terms of volumes now, in a three to five year timeframe, you will see a lot more people coming on board. Companies are looking at what can be done in the luxury segment and make it more affordable,? he said.