GST impact: Audi sees double-digit fall in volume

The increase in cess on large cars and sports utility vehicles (SUVs) may bring down the luxury car volume by 10 per cent for companies like Audi, the India head of this luxury carmaker said.

“When the luxury cars were taxed at 43 per cent under the GST (28 per cent GST and 15 per cent cess), we were expecting a double digit growth. But it is unlikely to happen now. We are now expecting a double digit decline since the cars will become more expensive than the pre-GST prices,” Rahil Ansari, head of Audi India, said.

Once the increase is effective, Audi’s A3 — the entry segment mid-size sedan — will turn costly by ~1.8 lakh (around six per cent), prices for its A6 car will go up by ~5 lakh (almost 10 per cent) and Audi’s flagship SUV will cost around ~7 lakh or about nine per cent more than the current price. “Even the luxury car buyers are price sensitive, especially in the entry segment. If an A3 will cost ~1.8 lakh more, it will restrict them from owning an Audi,” Ansari said.

The GST Council may put its stamp on increasing the cess from 15 to 25 per cent at a meeting on Saturday.

The increase in cess will immediately not have any major impact on Audi’s investment strategy. However, the company said they will re-evaluate their plans if volumes decline. “We will not overreact. We will have a look on the overall impact on the volumes first and since every business is driven by products, in case that drop happens, we will have to re-evaluate our plans,” Ansari said.

Audi is also not expecting the festive season demand to see any growth over previous year. “We are not expecting momentum,” he said.