Financial Chronicle | Jan 27 2012
GM joins chorus against FTA duty cut on EU cars
By Saahil Anant, New Delhi
US-based automaker General Motors India has joined the chorus against reduction in import duty on European cars proposed under the India-EU free trade agreement (FTA), which is expected to be finalised by next month. Japanese carmakers such as Maruti Suzuki and South Korea’s Hyundai Motor have expressed angst against the move after having invested over Rs 10,000 crore each in India.
“With the India-EU trade agreement, the level-playing field is not assured. To ensure a level-playing field, duty cuts have to be applicable to other FTAs as well. We had entered the market in 1996 and have invested over $1 dollars (about Rs 4,900 crore),” said P Balendran, vice-president of General Motors India. The firm is the third major foreign automobile investor in India after Suzuki and Hyundai.
European carmakers such as Mercedes-Benz, BMW and Volkswagen are likely to benefit from the proposed duty cut under the India-EU FTA. Under the existing guidelines, imported cars attract 60 per cent import duty. However, the bilateral trade agreement under the India–EU FTA proposes slashing of duties to 30 per cent. Europeans are likely to gain an edge in pricing at the expense of Japanese and Korean carmakers, especially in high-end segments.
General Motors has so far invested in two manufacturing facilities in Halol, Gujarat, and Talegaon in Maharashtra, employing 4,500 people. The company has also set up a technical centre in Bangalore. At present, the company imports its Captiva sport-utility vehicle from Korea as a fully built unit.
“We are hoping that CBUs are in the negative list (of negotiations) under the India-EU FTA, so that business interest of all manufacturers are protected. We want to bring value addition to the country with higher investment through local manufacturing,” Balendran said.
Industry officials fear Europeans may not invest more in manufacturing in India that will cut investments and possibilities of job creation, making the country an import-skewed market for high-end cars. Though imported cars form a small chunk of about 15,000 units of the overall car market of over two million units in India, their share is expected to increase rapidly after the proposed duty cut.