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Mercedes profits to be hurt by Rupee depreciation and import duty hike

PTI 14 Jun 2012, 16:06:20 IST
Hyderabad, Jun 14: Luxury car maker Mercedes Benz today said the Rupee depreciation coupled with Indian government's measures like increase in import duties on completely built units will hurt the profitability of the company.

The company had to increase prices by 5 to 6 per cent due to increased duties, Peter T Honegg, the Managing Director and CEO Mercedes Benz India, said.  

“The normal price increase will be around one per cent. But due to the government decisions we had to increase another 5 to 6 per cent on our cars.

“Because, this is what the government is asking us additionally. We can offset that only by asking our customers to pay more and they are willing also,” Honegg said in a press conference.

He said rupee depreciation against dollar and euro is another cause of concern for European car maker. Though temporarily the company goes for hedging, in the long run it is not possible, he added.

“But in the long run, if the rupee stays at minus 20 per cent, then the only option is that we stop selling one or the other car that is not profitable for us or we have to raise prices, which is also not for good for competition. If rupee depreciates, all the European manufacturers will have the same problem,” he explained.

He said the increased duties on CBUs will result ultimately result in huge hike in prices at the consumer end and the issue is being taken up with the Government by the Society of Indian Automobile Manufacturers.
During the last budget, the central government increased the customs duty from 60 per cent to 75 per cent for import of completely built units (CBU) of large cars, multi and sports utility vehicles with cost exceeding $40,000 (Rs 2,000,000), per car.