EU FTA to boost India’s auto components’ exports

New Delhi: The India-EU deal is expected to reshape competitive dynamics and market access on both sides while providing better access to European markets for Indian auto and component exports, aiding the sector's long-term growth prospects, according to a report by Icra.

It is expected to give a boost to premium vehicle imports, but have limited disruption to the mass market, it added.

The sharp reduction in duties on EU-made vehicles (completely built units) is expected to drop from as high as 110 per cent to 10 per cent over time for a fixed quota/annum, above an import price of Euro 15,000/vehicle, the report said, adding that this will open India's car market to European original equipment manufacturers (OEMs).

"Lower tariffs are expected to improve access for European brands like BMW, Mercedes, Audi, and Porsche, enabling competitive pricing and new growth opportunities in India's fast-expanding auto market," the report pointed out. It, however, said there will be a limited impact on the mass market segment and the tariff cuts are likely to only benefit premium internal combustion engine (ICE) vehicles, with small/mid-segment cars (constituting a bulk of the Indian market) remaining largely unaffected.

"Additionally, tariffs on electric vehicles will stay unchanged for the first five years. Nonetheless, the deal has the potential to marginally increase competitive intensity in the market to an extent," it added. Icra noted that there will be improved competitiveness for Indian auto and auto component exports while also providing better access to European markets, aiding the sector's long-term growth prospects.