Mercedes to assemble engines for S-Class locally

Mercedes-Benz India will take one step ahead in getting local as the company plans to assemble engines for Mercedes-Benz S-Class in India itself. The move has come after the government’s decision of hiking custom duty on import of pre-assembled parts. Earlier this duty was 10% but in March this year government raised it to 30%. However luxury car maker Mercedes-Benz wanted to keep the price of Mercedes-Benz S-Class intact for Indians. At present, Mercedes-Benz S-Class price is Rs 85.57 lakh for base variant (ex-showroom Delhi).

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Peter Honegg, Chief Executive and Managing Director at Mercedes-Benz said that the company is implementing all measures to ensure that the company has lower duty for the Mercedes-Benz S-Class in the backdrop of the launch of a special edition of this flagship sedan. The engines for Mercedes-Benz C-Class and Mercedes-Benz E-Class are already assembled in India by Force Motors Ltd, which will now also assemble S-Class engines. As a matter of fact, engine forms about 15% of the car’s cost and the additional 20% duty since March 2011 encouraged Mercedes to take such step. Mercedes-Benz has claimed that it was incurring loss of Rs 10 lakh on every unit of Mercedes-Benz S-Class due to increased custom duty. The new engines for Mercedes-Benz S-Class would be available in four to five months.

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Earlier in February 2011 also, customs duty was raised from 10% to 60% on pre-assembled parts such as engines. Such drastic step brought the cost of production of car on par with the CBU units. Mercedes-Benz India would have been more prepared if they were informed beforehand about the hike as it takes 8-10 months to develop a new assembly line.

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