Japanese carmakers want sops similar to European carmakers

Japanese carmakers want India to provide concessions similar to those likely to be offered to European auto companies as the proposed Indo-EU free trade agreement looks set to become a bilateral issue between India and Japan. Carmakers such as Toyota, Honda and Maruti Suzuki, which control more than 50% of the Indian market, are irked by the government's proposal to slash duties on luxury cars under the Indo-EU FTA. They are demanding a level playing field. 

"We should get a level playing field. A similar clause should be included in the Indo-Japan FTA to accord equal opportunity to all companies," said Hiroshi Nakagawa, managing director of Toyota's Indian subsidiary. He added that Japanese companies will be at a disadvantage if India provides selective concessions to EU companies. "There must be fair market conditions and level playing field," said Jnaneshwar Sen, senior VP marketing and sales at Honda Car India. "If the government decides to lower duty on car imports from Europe, the same should be extended to Japanese carmakers," said Jnaneshwar Sen of Honda Car India. 

India has proposed to lower import duties on luxury cars during discussions on a free trade agreement with the European Union. The cuts, if implemented, will help European companies sell some of their marquee brands at competitive prices. Luxury sports cars such as those produced by Mercedes-Benz would become cheaper by almost a crore of rupees. 

Indian automobile companies have also opposed the concessions, and economists and consultants have pointed out that imports may become the preferred option for European companies at the cost of local manufacturing. The import duty on fully built cars amounts to 75%, but this bulges to around 120% after the addition of countervailing duty, VAT and other levies. And for expensive cars priced over $40,000, the recent budget has proposed an increase to 100%, which would further jack up prices. 

A Comprehensive Economic Partnership Agreement (CEPA) between Japan and India came into force in August 2011. Tariff on gearboxes imported into India are to be gradually reduced from 12.5% to 6.25% over eight years while duties on diesel engines are to be reduced from 12.5% to 5% over six years. The 10% tariff on mufflers is to be completely eliminated in 10 years, and the 5% duty on iron and steel products is to be eased out in five years. Passenger vehicles and two-wheelers (CBUs) are excluded from the concessions. 

Japanese automobile executives want similar concessions to be incorporated in the FTA with their country. "From what I have read in the newspapers, the import of European cars would be in a small number (compared with) the total size of the Indian market by 2017. They may target just 1% of the total domestic market. But at Maruti Suzuki we largely cater to the mass market, which starts from the entry level to mid segments," said Maruti Suzuki Chairman RC Bhargava, preferring not to comment on the FTA negotiations.