GST & Make In India Effect: Mercedes Car Prices Slashed By Rs 7 Lakh; India Beats US & China In Greenfield FDI

Two very important and crucial developments related to Indian business and economy has happened in the last 24 hours, which will surely have long-term implications for the entire economy.

Mercedes Benz has decided to slash prices of their India manufactured cars by Rs 7 lakh, and the reason which they attributed to this heavy discount is the implementation of GST, effective July 1st. Hence, this becomes the first case study for Indian economists, wherein both Make in India and GST, collectively has resulted in reduced prices for a luxury commodity.

On the other hand, India has beaten US and China in attracting greenfield FDI across the globe. This is a big achievement for the BJP Govt., which is right now busy in showcasing actual results of PM Modi’s three years in power.

Mercedes-Benz Car Prices Reduced by Rs 7 Lakh

In India, Mercedes-Benz manufactures 9 models of cars, which are CLA, GLA, C-Class, E-Class, S-Class, GLC, GLE, GLS and Mercedes-Maybach S 500. Once GST is implemented, they will slash upto 4% of the prices of these cars.

Overall, 2-9% of the overall car price will come down, depending on the respective states, and local taxes.

Hence, CLA Sedan will now cost Rs 1.4 lakh less, whereas Mercedes-Maybach S 500 will be cheaper by Rs 7 lakhs.

Attributing this reduction in price to GST, Mercedes-Benz India Managing Director and CEO Roland Folger said, “We now know more in details what taxations are going to be in various states. We have a clear picture of the road ahead. So we have decided to compensate the difference between the current and post GST prices for our entire Made in India range.”

However, he warned that if GST implementation is further delayed, then the price reduction will be rolled back.

We have done a comprehensive, and detailed post on which products and services would become cheaper, and which will become costlier, post-GST.

India Beats China & USA In Greenfield FDI

On a somewhat related news, wherein Make in India vision is the common denominator, India received more greenfield FDI (foreign direct investment) than US and China, last year.

As per a report prepared by fDi Intelligence, India received a total of $62.3 billion as greenfield FDI, which is the highest any country has received. This is the second consecutive year when India has beaten all other countries (including US and China) in attracting greenfield FDI.

The report said, “India managed to keep the crown as the world’s number one location for greenfield capital investment for the second year running – ahead of China and the US.”

For the uninitiated, greenfield FDI is that investment which a company makes in another country in order to set up an establishment from scratch, right from the beginning. Hence, investments in existing or running businesses are not considered under greenfield FDI.

$62.3 billion was invested as greenfield FDI across 809 projects in the country.

Globally, real estate projects attracted maximum greenfield FDI: $157.5 billion, which is an increase of 58% compared to 2015. On the other hand, Oil and Gas projects attracted investments of $121 billion, and alternate and renewable energy received $77 billion.