The India-European Union free trade agreement, expected to be signed by April, may bring a smile to the faces of auto lovers in the country–atleast one section of it. A major concession that the EU expects to wrest from this agreement is the elimination of import duties on auto products, which in turn is expected to directly bring down the price of luxury cars in India by an estimated 38%.
Your super-priced Audi, Mercedes and BMWs will now be available at a huge discount to existing prices.
A large portion of the import duties on a car consists of various taxes and duties such as VAT and other local taxes, the combination of which results in the imposition of atleast 110% additional cost on the vehicle. With the elimination of duties, prices would tumble and a BMW 7-series car, for example, may become cheaper by some Rs30 lakhs as compared to its existing price of Rs80-odd lakhs.
The Free Trade Agreement is also expected to cover car components, which would bring down the prices of cars assembled in India by an expected 10%.
Expectedly, the proposals have exited strong resistance form domestic car manufacturers, including some foreign ones such as Japan and Korea, whose own FTAs do not include the dropping of duties in the auto sector.
Representatives of the Society of Indian Automobile Manufacturers say that their opposition to the proposals cannot be labelled as protectionist for the opening up of trade did not mean hurting the local industry.
Luxury car makers however argue that though protectionist measures could be justified where the domestic industry is present in strength, the luxury car segment had no domestic presence.
Japanese and Korean manufacturers do not enjoy duty exemptions, and not surprisingly, they have objected to these changes, stating that the Indian government should encourage domestic production, and not imports.