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Weak Rupee may make imported cars costlier
Swaraj Baggonkar in Mumbai
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September 19, 2008 02:26 IST

The rupee's slide against the dollar and euro has put pressure on international automobile companies as compressed margins may force them to revisit prices of imported models in the next few months.

Companies like Daimler (Mercedes), BMW, Volvo, Nissan, Porsche and Honda, which import models into India, are currently forced to absorb losses on prior bookings due to rupee depreciation.

An upward revision of prices in the wake of a weak rupee is not ruled out by them.

The rupee has depreciated by 18 per cent since the start of this year when it stood at Rs 39.29 against $1. The Indian currency ended at 46.42 against the greenback on Thursday.  The euro too has strengthened against the Indian currency by 14 per cent, from Rs 57.60 per euro in January this year to Rs 66.98 on Thursday.

Currently, the total import duty charged on a car in India works out to 114 per cent, which includes basic custom duty, surcharges on custom duty, excise duty among others. This duty structure more than doubles the price of the car from its original cost. Mercedes, which is the largest importer of luxury cars in India, has said that the company is trying hard to maintain costs and is not looking at hiking the prices immediately. However, if the situation does not improve then the company will have to take a call on price hikes at a later stage.

"We are aware of the volatility in exchange rates and are trying to cushion the impact on customers. We have a buffer demand available and is enough to last for sometime. The question will be how long will we be able to continue to take hit on margins," said a Daimler spokesperson. Daimler India, under the Mercedes brand name sells about six models in India � the CLS, SLK, CLK, M Class, S 500 and SL Class in the price range of Rs 35 lakh to Rs 1 crore. The company's imported range (completely-built unit)  has seen a 22 per cent rise in sales so far this year and constituted almost 5 per cent of the total sales last year at 118 units.

Neeraj Garg, director (marketing and sales), Nissan Motor India, said, "No decision has been taken yet to increase prices at the moment but we are watching the situation closely and will take a call later."

Nissan sells two CBU models in India, including the X Trail and the Teana, both priced above Rs 20 lakh.

Volvo India, which imports its models from Sweden due to an absence of a manufacturing facility in the country, says the auto-maker is concerned about the situation. "We are concerned about the situation and as a company we are looking at it, we will take a decision. The demand for our cars is growing and the total market for luxury cars in India above Rs 25 lakh is expected to reach 10,000 units," said Paul de Voijs, managing director, Volvo Car India.

The company, which until now has sold 100 units of its two models XC90 and S80, is apparently forced to slow down on expansion due to unavailability of adequate manpower and resources like real estate space and logistics. It currently operates just three dealerships in India.

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