Quota under auto duty concessions to largely benefit traditional EU carmakers under FTA
Additionally, the quota will be largely expanded to include traditional automakers in the European Union (EU), the official said.
India and the EU announced the conclusion of negotiations for the agreement on Tuesday. It is expected to be signed and implemented only this year.
As per the agreement, India has given an annual quota of a total of 1.6 lakh diesel and petrol vehicles and 90,000 for electric vehicles (EV).
India has not extended any tax concessions for cars priced below €15,000 (CIF – cost, insurance, freight); This includes customs duty, other taxes such as GST and road tax, etc. That translates to a retail price of around 25-27 lakh rupees after adding components like.
Nearly 90 per cent of India’s mass market domestic passenger car segment comes in the sub-Rs 25 lakh price category. Currently, the country’s passenger vehicle market, which is the third largest market in the world, stands at over 43 lakh units per year.
“India mostly gives quota to large-size internal combustion engines (internal combustion engines) and high-price range EVs, while at the same time protecting sensitive segments of the Indian automotive industry (small-size engine capacity internal combustion engines and mid-low price range EVs),” the official said. Under the FTA, the quota is divided into three price ranges for diesel and gasoline cars.
No tax deduction will be applied to cars whose price is below 15,000 Euros.
Import duty for cars priced between 15,000 and 35,000 euros will be reduced to 35 percent with a quota of 34,000 units in the first year of the agreement’s implementation. The Indian market in this band currently stands at around 2.5-3 lakh units.
For cars priced between 35,000 euros and 50,000 euros and those priced above 50,000 euros, the tax will be reduced to 30 percent in the first year, with a quota of 33,000 units each.
The total quota in the first year will be 100,000 units.
The current 110 percent 30-35 percent customs tax range for vehicles in all price ranges above will be gradually reduced to 10 percent by the fifth year, and the quota will be increased to 160 thousand units.
Tax on CKD (fully disabled) units for 75,000 ICE vehicles will be reduced from 16.5 percent to 8.25 percent; This move is expected to reduce the prices of luxury cars assembled in India by manufacturers such as Mercedes-Benz, BMW and Audi.
Similarly, no concessions will be made for electric vehicles for cars priced up to 20,000 Euros.
The 90,000 quota is distributed across three price bands: 20,000 euros to 40,000 euros; From 40,000 Euros to 60,000 Euros; and over 60,000 euros.
The duty concession for EVS will begin in the fifth year of implementation of the agreement.
Duty cuts and quota will help EU manufacturers launch new models and start production in the country gradually, the official said, adding that India’s quota starts with one lakh units, then will increase to 2 lakh units in the 10th year and then to 2.5 lakh units in the 14th year.
The CKD quota will also start from 75,000 until the fifth year, and will decrease to 50,000 in the 10th year. India’s quota will never exceed 3 lakh. There is no duty interruption in Semi-Knocked Down (SKD) units.
“And we expect the figures to be less than 2.5 percent of our markets,” the official added.
The EU will provide Indian automakers with a quota of 2.5 times the quota that India will offer to European manufacturers under the agreement. The EU agreed to full liberalization of CKDs and all vehicles priced above 50,000 euros.
The quota for India below Euro 50,000 is 6.25 lakh vehicles.
“We want to capture the market and bring in supply chains. Auto part concessions are going to zero in the 10th year, so we can bring supply chains here and add value,” the official said.
The EU will offer complete liberalization to the Indian automotive sector for internal combustion fuel vehicles, hybrids and battery electric vehicles.
The official added that easing norms for CKD imports would encourage the EU’s OEMs (original equipment manufacturers) to set up local assembly lines.
This serves as a stepping stone, moving foreign OEMs from import to assembly and eventually to full localization as they build local supply chains.
This brings high-end manufacturing processes, quality standards and advanced R&D practices to the Indian ecosystem, the official said.
