Prices of luxury cars drop by Rs 10-30 lakh due to local assembly

Luxury on wheels now costs less, thanks to recent moves by car makers to assemble cars locally and also source more engines and other parts from within India. Prices of luxury car models have dropped by Rs 10-30 lakh in the past couple of months. Tata-owned Jaguar managed to knock Rs 25 lakh off from its 3.0-litre XJ sedan, bringing its cost down to Rs 91 lakh. The Mercedes S Class 500 now sells at Rs 1.36 crore (ex-showroom Pune), down Rs 30 lakh.

The third-generation BMW X5, a sports utility vehicle, was launched at a price of Rs 70.90 lakh, about Rs 10 lakh lower than the outgoing model. Jaguar managed to trim prices by starting local assembly at its Pune plant and through cost savings realised by building more than one model on the same platform. Import of fully built cars attracts a customs duty of 100% and above, but locally assembled cars need to pay only 30%. Luxury car volumes have increased from about 28,000 in FY13 to 35,000 in FY14, making local assembly more feasible.

German luxury carmakers Mercedes-Benz and BMW source engines for some models from Indian commercial vehicles maker Force Motors of Pune. This has helped them control costs and pass on price benefits to consumers. Putting a sub Rs 1 crore Jaguar on Indian roads with the help of local manufacturing, while maintain a high luxury quotient, has stirred demand, Jaguar Land Rover (JLR) officials say. "It has helped us increase the market share and we have witnessed an impressive response. The price benefits have clearly helped in improving sales," JLR India vice-president Rohit Suri said. The company is working on new models for local assembly, but is yet to crystallise the options.

Bid to attract more buyers 

Prices do influence buyers even in the luxury segment. Analysts tracking the auto market say many companies are bringing prices down. "We may see companies such as Fiat-Chrysler bringing the Jeep portfolio through the imported completely built route, but afterwards (may be within a year) they will change that to local assembly," says Amit Kaushik, principal analyst for autos at IHS Automotive, an international consultancy.

More competitive products help companies attract a larger customer base. In a few cases such as the S Class, Mercedes-Benz India has been able to rationalise prices by stripping some features without compromising on performance and value. The newly launched S350 CDI variant, with a price tag of Rs 1.07 crore, is one example.

"We are offering different options to customers for different prices," said Eberhard Kern, MD & CEO, Mercedes-Benz India. Meanwhile, Swedish carmaker Volvo is also looking at rolling out aggressive prices for Indian customers and plans to localise some of its models.