Even as the European Union (EU) pushes for sharp import duty cuts on fully-built cars under the upcoming Free Trade Agreement (FTA) citing higher Indian car exports, official trade data between the two show that a balance already exists in the auto sector.
India's vehicle and component exports to EU amounted to $3.5 billion ($1.7 billion for cars) in 2010-11, a bit higher than EU's $3.4 billion worth of auto exports to India, the Society of Indian Automobile Manufacturers (SIAM) said, citing Commerce Ministry data.
In fact, in the same fiscal, India's car exports to EU dipped 25 per cent to 2.25 lakh units due to a market slowdown and removal of existing scrappage schemes, while EU exports more than doubled to 11,000 units. This is apart from a 29-per-cent growth in EU's completely knocked down (CKD) exports at 22,000 units in the same fiscal. CKD units are later assembled locally.
“The actual applied rate of (import) duty by EU on Indian cars is only 6.5 per cent. Therefore, the gains to India will only be marginal (if these duties are removed in the FTA). But if Indian duties are reduced from 60 to 10-15 per cent, it will open up our domestic sector to severe and unjustified market distortions which will completely disrupt and even rollback the gains made in this sector over the last decade,” SIAM said.
The European side cites the much larger volume of Indian car exports to EU as a rationale for reducing domestic tariff barriers – carmakers such as Hyundai, Maruti Suzuki and Nissan largely export small cars. EU's largely premium vehicle exports – such as BMW, Jaguar and Audi, – are smaller in number (since most are exported as CKD), but higher in value terms on a per car basis.
“The FTA is all about give and take. India will not be giving any unilateral concessions. What we give will depend on how much market access we get in return in the sectors of our interest,” a Commerce Ministry official said.