Earlier this month, the government sprung a surprise when it hiked custom duties on completely knocked down (CKD) bikes by 5 percent. This was unusual considering import rates on fully built bikes coming from Thailand (via the Free Trade Agreement) saw no change in rate. And now, just 10 days later, the Indian Government has pulled another puzzling move – it upped the ante by announcing a new policy. The Central Board of Excise and Customs (CBEC) sent out a notification stating that custom duties on completely build units (CBU) has dropped from 75 percent to 50 percent for motorcycles with displacement above 800cc. But that's not all, custom duties on motorcycles under 800cc have also reduced from 60 percent to 50 percent.
What does it mean?
Import duties on completely build units (CBU) have always been exorbitant and prices for performance motorcycles have increased significantly over the past few years. Manufacturers have been negotiating with the government to relax duties so that they can reduce prices for their products. The government’s stand on the high duty was, initially, to protect local manufacturers, but it has now become more about promoting local manufacturing. As a result, few manufacturers started bringing their products via the completely knocked down (CKD) route and set up assembly facilities in India. But with the hike in CKD prices, the government is sending out a message that it is stressing on of local manufacturing, rather than just local assembly.
Understandably then, this reduction in CBU prices is a welcome move for enthusiasts who have endured painfully steep prices over the years as the performance market isn’t large enough yet for brands to consider local manufacturing in India. However, the rise in CKD prices is a bitter pill to swallow for bike makers that have made large investments and a strong commitment to our market by setting up facilities for local assembly.
Who are the gainers?
The brands that are likely to benefit from the reduction in custom duties include Aprilia, BMW Motorrad, Yamaha, MV Agusta, Indian Motorcycle and Moto Guzzi. As these brands bring their motorcycles via the CBU route, we can expect their products to be much more affordable. However, manufacturers are still working out the impact of the reduction of duties and will be sharing a revised price list soon.
There are some brands whose portfolio consists of both CKD motorcycles and CBU offerings, so the impact of the new change in policy will be a bit mixed. Kawasaki is the biggest player in this segment as its litre-class and above offerings will be cheaper (barring the Ninja 1000). However, the hike in CKD duties will affect prices of the Kawasaki Z250, Ninja 300, Z650, Ninja 650, Vulcan S, Versys 650 and Versys-X 300. Prices for the Honda CBR1000RR Fireblade and the Gold Wing will witness a drop while that of the CBR650F and the Africa Twin will increase as they are CKDs. Suzuki only assembles the Hayabusa currently in India, but, it has plans to locally assemble the upcoming GSX-S750 and maybe also bring in the V-Strom 650 via the CKD route. Given the drop in custom duties for CBUs, it will be interesting to see what strategy the Japanese two-wheeler giant adopts.
One brand that has been particularly affected by the change in government policy is Triumph Motorcycles. The British brand had announced last year that it wanted to locally assemble 90 percent of its products in India. The increase in CKD and the drop in CBU prices has dealt a double blow for Triumph. Commenting on the revision of custom duty, Triumph Motorcycles India MD, Vimal Sumbly, said, “After the budget, this is a great initiative to cut import duties on CBUs, but for CKDs where local assembly is done in India, the import duties are increased by 5 percent and the FTA remains unchanged. We would urge the government to relook into this area.” Harley-Davidson will also be very unhappy, as will Benelli.
The only brand that hasn’t been completely affected by the revision in CKD and CBU prices is Ducati. The Italian two-wheeler giant almost entirely imports its offerings from Thailand. Since India and Thailand have a FTA (Free Trade Agreement), import duties are significantly less despite the bikes being brought in via the CBU route. The only products in Ducati’s current portfolio that are imported from Italy are the Monster 1200 and the Panigale R Final Edition, prices for which will witness a reduction. Even the new Panigale V4 will be coming from Thailand, hence the competitive pricing.