European luxury cars set to become cheaper

Roudra Bhattacharya Arun S. New Delhi | Updated on August 30, 2013


Duty cuts from free trade pact with EU may kick in soon;Japanese, Korean companies will have to wait longer

Premium and luxury cars from European firms such as Jaguar, BMW, Volkswagen and Renault may soon become sharply cheaper than imported models from Honda, Toyota and Hyundai.

This is because carmakers from Japan and Korea may have to wait for import duty cuts on cars, say Commerce Ministry officials, even as European firms could soon get such benefits under the upcoming India-EU Free Trade Agreement (FTA).

Under the FTA, the duty on luxury car imports from nations such as Germany, the UK, Italy and France may be halved to 30 per cent, according to various sources. In return, India could get greater access for its services and agri, textile industries to Europe.

Fully-built car imports from all other regions will attract a 60 per cent import duty, impacting Japanese players, apart from the US-based General Motors. Other non-European firms could also find it expensive to import new models to India.

The issue of extending concessions to other major auto producing countries may be taken up only when the review process of the respective Comprehensive Economic Partnership Agreement begins. “Nothing prevents India or Japan and Korea from giving each other further concessions. But something equally valuable has to be given in return,” an official said.

Preferential treatment to countries/regions under an FTA is also allowed by the World Trade Organisation norms as an exception to its general rule of Most Favoured Nation (treating all trading partners equally and without discrimination).

Not Fair deal

“We currently have a level playing field, which will get disturbed. Companies are putting in investment in the country because of high entry tariffs, this may change,” Mr Jnaneswar Sen, Senior Vice-President for Sales and Marketing, Honda Siel Cars said.

The Society of Indian Automobile Manufacturers has also communicated the auto industry's concerns to the Government.

It has argued that while fresh future investments will be impacted, this will also thwart India's chances of developing its beyond small cars into a maker of large and high technology vehicles.

“All manufacturers should get a fair deal from the Government as future business will be impacted,” said Mr Sandeep Singh, Deputy Managing Director for Marketing, Toyota Kirloskar said.

“It will make a difference in the premium segment, especially for the Lexus luxury brand we are planning to launch next year,” he added.

Exporters Benefit

Companies with high exports from India to Europe, such as Renault-Nissan, Hyundai and Maruti Suzuki, may gain overall in the FTA. This is because the European import duties on small cars, for which India is a global production hub, may be removed.


Published on January 16, 2012

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