Cess impact: Audi India expects ‘flattish’ sales in 2018

Luxury carmaker Audi has revised its India growth target — from double-digit numbers, it is now looking at “flattish” sales in 2018.

According to Rahil Ansari, Head of Audi India, the imposition of cess over and above GST, and the customs duty hike announced in the Union Budget have come as a cropper, with demand taking a hit. This has led the carmaker to revise its India numbers.

The company has also initiated a 3.8 per cent price hike across models beginning April.

In 2017, Audi sold 7,876 cars in the country, a 2 per cent growth over the 7,720 units it sold in the previous year.

Comparatively, 2015 was a better year for the German carmaker, when it sold 11,192 units.

Audi had been hopeful that the original GST rates introduced on July 1, 2017, would help accelerate sales with a uniform tax structure coming in place.

However, the newly introduced additional cess will have an adverse impact, said Ansari.

“Demand has been hit. And, from anticipating a double-digit growth, we are now happy that growth remains flattish,” he told BusinessLine .

For instance, sales picked up in the pre-GST period last year, and again around August 2017 (before the cess was imposed). But these reflect advanced purchase decisions.

So a double-digit growth in sales in August was offset by a similar double-digit decline in Diwali sales.

Continued investment

While tax incidence has hit demand, Audi will not shift focus away from India, said Ansari. In fact, it will continue to invest in the country, which it sees as a major growth market.

“India continues to be a strategic market for Audi. It has a great potential to grow. We will continue to invest in India; but yes, the recent developments do not make it easier. Investment comes when there is a business case,” he said.

While declining to comment about the company’s long-term growth outlook, Ansari said it will look to expand its portfolio across the “A” (sedan) and “Q” (SUVs) series. Ramping up of portfolios will happen this year onwards. The focus is now on profitable growth.

“Obviously, we do not expect to continue having a flattish growth for long. We wouldn’t then be ramping up our portfolios,” he said.

Nearly 95 per cent of Audi’s India sales come from models that are assembled or made locally.

The EV bet

Audi is also bullish on its upcoming electric vehicle portfolio. By 2020, it expect to launch an EV in the country, provided the “necessary infrastructure” is put in place.

At least three EVs will be launched globally by 2020 and, by 2025, the company is hopeful of rolling out one EV every year, said Ansari.

However, the company is in favour of a comprehensive Central policy rather than leaving it to State governments.

“Imagine a scenario where we have launched our EVs and then we know they aren’t compatible or compliant with certain parameters put down by the States.

“Hence we would have preferred a Central policy,” he said.

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