Carmakers oppose duty relief on cars from European Union

As the date for inking the India-European Union (EU) free trade agreement (FTA) draws near, Indian, Korean and Japanese carmakers in the domestic market are lobbying to ensure that the government does not agree to EU’s demand of removing import duty rates on automotive products.

They feel such a move will give European car companies an edge over other players in terms of cost and eventually tilt the market in their favour.

A senior official of Society of Indian Automobile Manufacturers (SIAM), who requested anonymity, believes if India and EU dismantle all bilateral barriers in automotive sector, it would sound the death knell for other players in the industry.

“The government must realise that if they ink the pact and decide to include the auto sector in it, the impact will be more negative than positive. The removal of import duty will put pressure on car and auto component prices in the local market,” he said.

Currently, import of cars and sports utility vehicles (SUVs) attract 60% duties that adds up to more than 100% finally with the addition of various other levies such as countervailing duty and VAT. This doubles the prices of imported vehicles. Such inhibitive levies have worked as deterrent for consumers to import cars into the country. 

The official from SIAM said, “There is too much pressure from every quarter which might force the government to change its current stand on import duty relief to EU for auto products.”

Also, since countries like Japan and South Korea do not enjoy import duty relief on auto products, it would put companies like Toyota, Honda, Hyundai and others at a disadvantage against European car makers.
“I am sure the government will take into account the larger picture. It will be unfair if it goes ahead and lowers import duties for the European car makers. It has so far encouraged technology transfer to India, which has helped the economy. We expect a positive feedback from the government,” a senior executive from a leading Japanese automaker said.

Pritam Banerjee, head international trade, Confederation of Indian Industry (CII), said, “Some people argue that the FTA with EU will help Indian auto component makers to export in European countries. However, Europe has set a very high safety standard which is slightly unrealistic. Many countries have raised their concern on this with the WTO. So, technically there will be no advantage for India. I am sure government will take these factors into account before deciding on anything,” he said.