The Centre’s decision to hike import duties on completely knocked down (CKD) kits of motorcycles by 5% is having an unwanted impact on the Make in India programme with Vimal Sumbly, managing director of Triumph Motorcycles India, for one, saying the company will now prefer to import completely built units (CBUs) from Thailand as India has a free trade agreement (FTA) with the country.
“It would be more advantageous to assemble in Thailand as imports from there only attract a 10% tariff. With the hike in import duty by the government, we will have to pay 15% as import duty for CKDs,” said Sumbly.
In the Union Budget 2018, the Centre had announced a hike of 5% in customs duty on imports of both CKD units of trucks, buses, cars and motorcycles and CBUs of trucks and buses, taking the rates up to 15% and 25%, respectively.
The move has impacted sentiments at Triumph Motorcycles, which assembles most of its motorcycles locally, as it is now being forced to consider revisiting its business strategy. The company earlier this week increased prices by about 5.5% owing to the increase in duties. This was in contrast to its rivals BMW Motorrad and Harley Davidson bringing down prices, as the import duty on CBUs was brought down to 50% from 75%.
The company started selling motorcycles in India in 2014. Prior to that, the company used to import 90% of its motorcycles from Thailand, taking advantage of the FTA. However, Sumbly said that with the government’s increasing focus on the Make In India initiative, the company decided to shift to assembling motorcycles in India. Consequently, Triumph started assembling 90% of its units in India.
However, the latest move has made its plans go awry and created a sense of uncertainty. The company feels that this has been a mis-step as the government has given no relief by way of encouraging assembly in India. On the contrary, it has encouraged the company to re-think its strategy to bring CKD units to India.
Sumbly said, “If the government keeps penalising CKDs, then most luxury two-wheeler makers and luxury car makers will have to rethink their strategy”.
He added, “We make investment in India, put manpower and infrastructure and ultimately create jobs. Still we have to pay a duty of 15%, which is more than 10% for simply bringing in vehicles from Thailand. This is what I have been debating. This cannot be done. Or else, everyone will go back to Thailand. Why would anyone assemble in India?”
Triumph is the second-biggest luxury motorcycle (or motorcycles with engine capacity of 500cc and above) player in India, behind Harley Davidson.
Source: financialexpress.com