Premium bikes set to get cheaper

High-end bikes, including well-known global brands such as Harley Davidson and Triumph, are set to get cheaper as the government has slashed Customs duties on imported bikes to 50%.

Earlier, the basic Customs duty on import of finished motorcycles with engine capacities of 800cc and over 800cc was 60% and 75%, respectively.

Taking heed of the long-pending demand from the industry, the Central Board of Excise and Customs, through a notification on February 12, has slashed the duty on both these variants of motorcycles imported as completely built units (CBU) to 50%.

According to the notification, import duty on engine, gearbox, or transmission mechanism as a completely knocked down (CKD) kit in pre-assembled form of motorcycles, not mounted on a body assembly, has been reduced to 25%.

These pre-assembled parts attracted Customs duty of 30% earlier. Meanwhile, to promote local assembling of 800cc and above as part of Make-in-India initiative, the CBEC has hiked Customs duty on import of engine, gear box and transmission mechanism as a CKD kit (not pre-assembled) from to 10% to 15%.

According to Abhishek Jain, partner, EY, the reduced rates should encourage price reduction in motorbikes which are imported in a finished state for sale in India.

Deloitte India senior director Anoop Kalavath concurs. "By increasing Customs duty on engine, gearbox and transmission mechanisms, the government is sending out a loud message that it will protect automobile ancillary industry. This policy would encourage global auto ancillary industry to have a preference for India as a manufacturing base for global supply.”

However, Abdul Majeed, partner, PwC, has a slightly different view on the impact the decision will have on the industry. “The decrease should not have a significant impact on local manufacturing. I expect, considering growth in the Indian markets, OEMs (original equipment manufacturers) will prefer to manufacture vehicles in the country,” said Majeed.

The development comes weeks after the government in the Union Budget increased Customs duty on CKD imports of trucks, buses, cars and bikes to 15% from 10% earlier.

Further, duty on CBU imports of motor vehicles (trucks and buses) has been hiked from 20% to 25%. The government also raised Customs duty on specified parts/accessories of motor vehicles, motor cars, motorcycles from 7.5% to 15%. Besides, imported duty on truck and bus radial tyres has been increased from 10 to 15%.

Lobby body Society of Indian Automobile Manufacturers (SIAM) has objected to it, saying that the increase in import duty will impact the entire industry as all the automotive companies have to import some or the other components. However, those companies which have a large share of imports will get affected more.

According to the analysts tracking the automotive sector, the demand for premium bikes is increasing in India, and therefore, most of the major global brands are vying for the space in the world's largest two-wheeler market. India is also one of the fastest growing automotive markets in the world. The analysts add that as the import duties are very high, most of the companies are making efforts to source most of the parts locally.

ROAR ON THE ROAD

• Earlier, the basic Customs duty on import of finished motorcycles with engine capacities of 800cc and over 800cc was 60% and 75%
   
• The development comes weeks after the government increased Customs duty on CKD imports of trucks, buses, cars and bikes to 15% from 10%

(With inputs from PTI)