With GST just around the corner, Mercedes-Benz aims double digit growth in 2017 - The Financial Express

With GST just around the corner, Mercedes-Benz aims double digit growth in 2017

With GST in place, there will be a lot of uncertainty about the tax rate which would be levied on luxury cars

By: | Updated: March 10, 2017 9:31 AM
One of the key products that would witness price reduction under GST are luxury automobiles (Image: inautonews)

Car manufacturers struggled with clocking good sales figures post demonetisation, however, the impact was short-lived. Mercedes-Benz admits to suffering a 1.8 percent decline in the month of November 2016 which was an effect of restricted purchases due to demonetisation, however the brand saw a bounce back in December and sold over 13,000 units in 2016. The German carmaker is now aiming for growth above 10% in 2017, and is confident as sales figures of January and February are better than what they were the previous year. And now GST is set to be brought into effect beginning 1st April, 2017. This will affect taxes levied upon cars. Where small cars, that have a lower rate of excise duty (8%), will see a price hike due to GST, SUVs and luxury cars with 27-30% excise duty will mark a drop in price.

Mercedes Benz recently launched the fifth generation E-Class, according to the brand's VP (sales and marketing) Michael Jopp, over 500 bookings have already been registered. In the luxury segment, the German car maker has a market share of about 45 percent.

"We have been the number one in the (luxury) segment and expanded our margin by more than 40 percent over the next largest competitor in the segment in the last year," Jopp said, adding that aggressive product expansions, offering petrol and diesel variant across models, widening of the network contributed to the robust sales in the last year.

The key products that would witness price reduction under GST are luxury automobiles, processed food, FMCG and pharma products.

With GST in place, there will be a lot of uncertainty about the tax rate which would be levied on luxury cars, Jopp admitted. "We made a case not to be put in the highest tax bracket and urged that the luxury car segment should be allowed to grow," he said.

He went on to opine that only 1.5 per cent of the total passenger car volume in India comprises of luxury car sales, and the number is not growing. Merecdes Benz is prepared for a short-term decline in sales post GST implementation, and hopes for achieving its sales targets in the long run.

Mercedes is currently in the process of incorporating Euro-VI engines in their models by 2018 and is waiting for the availability of compatible fuel in the country. The brand has made an accumulated investment of Rs 1,000 crore in India.

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