[amrisharm]

Yea I agree that the Indian auto industry should be protected and all but we also do have to keep in mind that at present Indian auto companies are free to sell their products in the EU, Asia, America or Australasia by paying relatively low import duty. I honestly dont see this double standards situation going on for ever.

So I guess open market policy is not a question of IF but WHEN. Therefore it would be in the best interest of the Indian Auto Industry for the Govt. to gradually reduce import tax over an extended period of time. (Not overnight)

This will help accelerate the pace of development of our local companies into manufacturers of world class products that are comparable to those from any part of the world.

And I know our Home grown companies are capable of surviving.

[deetjohn]

Agree with GTO. Volume models should at least be CKD. I think CBU imports should be restricted. No one will ever want to build/ make anything here and it will harm the auto industry no end.

But if this reduction of import duty can lead to lower service and spare part costs, then its welcome news.

[RSR]

This had to happen sooner or later. And it's only fair on the part of the EU to ask India to lower its import tariff for completely built-up automobiles.

It's because auto MNCs export completely built-up automobiles (mostly small cars) in large volumes from India to the EU - Hyundai's i10 and i20, Nissan's Micra and Pixo, Suzuki's A-Star and the Renault (Dacia) Duster come to mind, apart from smaller volumes of others.

If the Indian govt. taxes CBUs from Europe too heavily for too long, then the EU can also play the same game and equally tax these volume cars they import from India. If they do that, then India will cease to be a place from which cars are exported to Europe. Not only will the foreign exchange earnings be lost and the balance of trade affected negatively, Indian customers will also lose the chance to drive some of the latest models meant for the developed countries. The quality of India's automobile industry (manufacturers and component makers) will come down by several notches as they will get into a nasty cost-cutting mode, since they would only be selling the cars here, apart from exporting it to other Third World countries in the SAARC, Africa etc. It would be a major setback for Indian customers.

You win some and you lose some in the game of international free trade. It's all about striking a balance, really. In any case, I don't see mass market cars built in the EU flooding India after tariffs are lowered - because EU-built cars cannot compete on price with those made here.

It would only lead to the expensive, premium cars becoming cheaper. This may, of course, make companies like Volvo think twice before investing in an assembly plant here, or prevent those like BMW/Audi/Mercedes from expanding their assembly operations. Such plants that put together cars from CKD/SKD kits employ far fewer people and require less investment than plants that manufacture cars in large volumes and generate employment in numbers - directly and indirectly. It's a fair trade-off, if you ask me, as this could not be avoided any longer.

[zulfi hansi]

It may not make any impact at all, since its only going to be in 2017, in 5 years all these Euro companies might as well would be manufacturing all their cars relevant for our market, except the very low volume 50-100 lakh plus as GTO stated.

Originally Posted by GTO

Naah, not happy at all.

I'm a firm believer of the "If you want to sell it here, BUILD IT HERE!" philosophy. When Audi can justify assembling the Q7 at Aurangabad, well, you can pretty much build any car here.

I completely agree with you, with the kind of competition even among the Euro companies actually it may be too little to late for them, for any car company who will wait to enjoy that in 2017, may be a foolish thing to do, rather start manufacturing to get into the market now, or be left out for ever.

[neo_trace]

Negotiations for the India-EU Free Trade agreement may conclude by April this year, moving a step closer to sealing of the pact that is expected to boost trade and investment.

http://zeenews.india.com/business/ne...ril_70250.html

[_raVan_]

It has been brought up again.

http://timesofindia.indiatimes.com/b...w/19504857.cms

The proposal, which has come at the behest of the German lobby that includes global giants like Mercedes, BMW and Audi, has so far been resisted by the government but it has set off fresh fears in the industry that the government may agree to cut tariffs to as low as 5-10 % from the notified rate of 60%. After all, the government has done a series of U-turns on its position despite getting nothing much in return.

[PPS]

I read somewhere that the problem with the FTA is more on the EU end since its an amalgamation of various nations.

[sgiitk]

@PPS; I think there is also an issue at this end. Also, remember Alcohol (sorry mods) taxation is another big issue with the EU.

So now what happens, if the FTA is signed, then imports of cars from the EU will almost stop till taxes are cut, or the prices will be slashed with the manufacturer taking a hit. This should not only impact the CBUs but also SKDs and cars with EU sourced parts.

[Motored Mindset]

PM Manmohan Singh and German Chancellor Angel Merkel have committed to concluding and signing the FTA this year. It's only a matter of months before Indian car buyers will know whether their favourite European cars have become affordable or not.

The full article is available in the Economic Times at http://articles.economictimes.indiat...oint-statement

With regard to my opinion on the matter, I'm quoting from a post I made in another thread on SIAM releasing a White Paper of India's Free Trade Agreements recently.

Originally Posted by Motored Mindset

Its wrong to say "build them here" as an argument for extremely high import taxes on foreign cars. The general argument goes that if a manufacturer is truly serious about India, they should set up a plant and begin manufacturing their cars over here thereby guaranteeing a between a few hundred to a few thousand primary jobs and several more secondary jobs (OEM suppliers, dealerships etc).

Remember, we're not talking about 0% duty here and therefore VW/Merc/BMW's free reign over the Indian market, but a minimum tax of 30%. What this means is that for me as a consumer, if European car despite its 30% tax offers me more in terms of fit, finish, safety and badge value, over an Indian product that is a product of a heavily shielded industry and usually very clumsily put together, I would be better off buying the European import and spending the money I have saved somewhere else.

To me a 30% tax sounds extremely fair, because it significantly protects the Indian industry and provides consumers with more alternatives, and yet keeps automakers on their toes to produce good products in order to justify why the imported cars are not worth the additional 30% you spend on them.

N. Gregory Mankiw (Professor of Economics at Harvard) had written a fantastic piece on free markets when he spoke about why the US should outsource jobs to India and save on costs (Link: http://gregmankiw.blogspot.ca/2006/0...ing-redux.html). The similar arguments can be applied to why India should import foreign cars by making markets freer (read: less tax). The Indian automarket has been shielded long enough and its a fact that the EU have a comparative advantage at producing better built vehicles than India.

I'm quoting what Adam Smith said in his 1776 classic "The Wealth of Nations" - “It is maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy...What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage.”

[500ContyCruiser]

Good move,

Source: India to allow import of 2.5 lakh EU cars at 10% duty

Originally Posted by Excerpt from the article

India is set to bind itself to allowing import of at least 2.5 lakh cars from the European Union at a concessional tariff of 10% — a move that will come as a major relief to European auto majors who have to currently pay 100% customs duty on vehicles that cost over $40,000.

The tariff rate quota — which means allowing a specified number of a product at lower duty — can be used over a five-year period, starting 2017 under the proposed India-EU Bilateral Trade & Investment Agreement. In case of breach of the quota, European car makers will have to pay a concessional duty of 30%, which is almost half the current notified rate. The tariff rate quota will apply to large as well as small cars.

While the EU is demanding that the quota be increased to three lakh, the government has so far held its ground although there are indications that there may be some trade-off so that India can gain in other sectors. Although there is no annual cap, 2.5 lakh cars translate into annual imports of 50,000 units, which industry body Siam said is more than 20,000-22,000 completely-built units imported from Europe...

Read more

[indian21r]

Just saw the article, how will this be distributed among the manufacturers?? Will Mercedes and fiat have the same quota? Chance for a lot of cars now to become more value for money. Will JLR and other British makes be part of this quota.

[AbhiJ]

This 10% duty comes into effect from 2017?

[rajshenoy]

I too read about this article.. but lacks some clarity. Can some Auto guru here translate it into everyday english ?

I want to know that

1. Does the duty reduction from 100% to 10% mean, a car costing 40 lakh now(20 lakh duty) will start costing 22 lakhs ? (even with 30% duty, it will look like 26 lakhs)

2. Is this applicable for vehicles under 40000$ as well ? Since we are talking about BMW 1 series and Merc A series etc. Will it fall below 20 lakh with this reduced duty ?

3. Can this also mean groups like Renault, VW and Fiat can offer some more value offering in the 15-20 lakh range ?

If my doubts are to be true, then what will happen to the likes of Hyundai and Japanese Giants ? (Read, Camry,Accord,CRV, Santa Fe etc)

[AbhiJ]

Originally Posted by rajshenoy

1. Does the duty reduction from 100% to 10% mean, a car costing 40 lakh now(20 lakh duty) will start costing 22 lakhs ? (even with 30% duty, it will look like 26 lakhs)

Possibly. Assuming the the manufacturers don't get greedy and want extra profits.

e.g. Maruti's cost for the new Dzire might be lower than the old one (Less than 4 metres), but it doesn't cost any lesser.

[zulfi hansi]

The car makers will utilize it very cleverly since it is a limited quota. All the cars irrespective of <$40,000> which are assembled here in India will not be getting this benefit simply because they are already assembled here. The cars that are exorbitantly expensive that will never be assembled here not at least in the next 10 years priced above 1Cr will be accounted in this. That way the price cartelisation will continue, no noticeable price difference may be seen in cars costing below 1Cr. IMHO. So all or many of us AAM AADMES will continue to hang our tongs out in anticipation of automotive nirvana. While the uberrich will pay maybe 25-50 L less on cars costing 1-3Crs, but never 50% off. Car companies will make an extraordinary bonus off this scheme until it lasts. Bottom line none will ever reap the benefit of this scheme in its true sense. Eventualy the scheme will be discontinued for its misuse. End of the story.