Published by Global Banking and Finance Review
Posted on January 28, 2025
By Aditi Shah and Nikunj Ohri
NEW DELHI (Reuters) - Some air shipments of car components by Volkswagen India were briefly held up by custom authorities in Mumbai due to a $1.4 billion tax demand, leading to delays in spare part supplies at dealerships, people familiar with the matter told Reuters.
The setback comes as German carmaker is trying to turnaround its sales in the world's third-largest car market with new launches and planned future investments amid growing competition from domestic players Tata Motors and Mahindra & Mahindra and foreign rivals Hyundai Motor.
India issued a notice in September to Volkswagen's local unit for allegedly evading taxes by wilfully "mis-declaring and mis-classifying" its imports and paying less tax on components for its Audi, VW and Skoda brand cars.
Skoda Auto Volkswagen India has previously said it complies with all laws and regulations and is cooperating with the authorities on the allegtions.
The hold-up, comprising more than 50 shipments of mainly spare parts, is related to the tax call by Indian authorities, said two of the sources with direct knowledge of the matter, including a government official.
The company was expected to provide some bank guarantees against the incoming air shipments but due to the tax issue there was a discrepancy in that amount, the government official said.
"This has now been resolved," the official said, without disclosing details of the amount of bank guarantee.
Skoda Auto Volkswagen India and the customs tax department did not respond to Reuters requests for comment.
The affected shipments mainly contained spare parts for the group's luxury brands such as Audi, Lamborghini and Porsche, and were gradually released after being held for about two weeks, according to two of the sources familiar with the matter.
Still, at least two car dealers in India are facing a delay of several days in getting their consignment of spares, the two sources added.
While the total dollar value of the delayed shipments was not immediately clear, in 2024 Skoda Auto Volkswagen India imported goods worth $770 million of which about 4% or $30 million was by air, according to commercially available data reviewed by Reuters.
The group has less than 2% share of India's car market of around 4 million units a year.
(Reporting by Aditi Shah And Nikunj Ohri, additional reporting by Aditya Kalra; Editing by Kim Coghill)
