Calcutta: The hike in the basic customs duty by the government in Union Budget 2018-19 will highly restrict the growth of the luxury car industry, says Mercedes Benz India chief Roland Folger.

"This will result in loss of additional revenue, which would have increased significantly with increase in volume," said Folger in an email interview on Friday.

The Mercedes India head was reacting to the increase in customs duty on auto parts and accessories and CKD components - varying from 5 per cent to 10 per cent in this year's budget.

"This increase, clubbed with the new social welfare surcharge of 10 per cent, at a time when the auto industry is reviving comes as a surprise," said Folger.

The auto industry ended 2017 on a positive note, when it grew 15 pre cent despite multiple policy disruptions in the previous year. But the customs duty hike is likely to impact the growth trend, he added.

While the hike in customs duty is explained as a necessary step by the government to force companies to manufacture in India instead of assembling, the Merc chief thinks the ploy will fail.