Swedish carmaker Volvo, today, announced that it will hike prices for all its models in India by up to 5 percent. The move follows the government's decision to increase the customs duty on completely knocked-down (CKD) kits and fully-imported vehicles in the Union Budget 2018.

In a media release today, the carmaker said it will be unable to absorb the higher costs and the price hike, to be effective from this month, will be applicable on new stock yet to be cleared by customs. 

In the Union Budget announced on Feb 1, 2018, Finance Minister Arun Jaitley proposed a customs duty hike on imported engine components from 7.5/10 percent to 15 percent, and an increase in the duty on the vehicle parts that are an element of the CKD kits – from 10 percent to 15 percent.

Additionally, he proposed a rate hike on one section of customs duty on Completely Built Unit (CBU) from 20 percent to 25 percent.

Volvo India currently assembles only the XC90 SUV locally at Volvo Trucks’ plant near Bengaluru. The rest of the vehicles in its model range are sold as CBUs or full imports.

Charles Frump, MD, Volvo Car India said the increase in duty came as a surprise and will have a short term impact on the automobile industry. He further called for subsidies on hybrids as they act as a stepping stone in the transition to full electrics. “What I would have liked to see is a much needed incentive for hybrids and plug-in hybrids as these solutions have an immediate impact on the environment. Volvo Cars' vision is aligned with the Indian government’s vision of going full electric but till we get to full electric, the interim is hybrids," Frump said in a company statement.

In a similar move, Czech brand Skoda had recently announced an increase in prices across its product range in India, from March 2018.