Automobile production has been encouraged in India. Indian government has redefined the meaning of completely knocked down (CKD) auto components. Higher import duties are assigned to assembled engines and gearboxes.

Earlier there is 10% import duty on CKD but now it has been raised to 30%, to encourage domestic manufacturing of the cars.

Luxury car makers like BMW, Audi and Mercedes are disappointed with higher import duties.

Praful Patel, the Minister of Heavy Industries said that some manufacturers will face difficulty with this sudden change in policy. However many companies are requesting to extend the time frame to two years before they can build their facilities and bring more indigenisation into the product.

Seeing the higher import duties, luxury car maker are in dilemma whether to pass the burden of higher import duty to the customers or to make their manufacturing units locally.

The more pressure is seen on Japanese companies who are already cutting their costs following the March earthquake.

Indian car market is always an attraction for luxury carmakers so with increase in import duties all the car makers are worried.