I N D I A ’ S N O . 1 M A G A Z I N E F O R A U T O M O T I V E N E W S , V I E W S & A N A LY S I S
Auto Monitor
Vol. 13 No. 13
w w w.a mo nli ne.i n
22 April 2013
INTERVIEW
The taste of utility Arun Dey, CEO, Reliance Autozone.
24 Pages
`50
PLASTICS
Faurecia to up localisation Pg 10
Plans to grow tier II supplier base
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Pg 15
SIAM voices concern over FTA Brings out white paper highlighting the issues of reducing import duties on vehicles. Nabeel A Khan New Delhi
A
t a time when the developed as well as emerging countries have encouraged and stood beside their automotive industry during its development phase and some of these countries announced huge bailout packages to sustain their automotive sector, the Indian government’s decision to sign the European Union-Free Trade Agreement (EUFTA) is a reason for concern. And no other than the Society of Indian Automobile Manufacturers (SIAM) has raised this issue. What it is arguing for is the fact that this move will reduce the competitiveness of the domestic manufacturer. Recently a high-level delegation including Prime Minister Manmohan Singh and Commerce Minister Anand Sharma visited Germany to hold talks with leaders of the European Union including German Chancellor, Angela Merkel. During the visit, delegates from either side had claimed that negotiations over FTA are in advanced stages, and so far no conclusions have been drawn. However, it has been
If the government allows reduction in import duties, it would mean a reduction in manufacturing activity in India.
reported that India has agreed to allow import of 2.5 lakh new and pre-owned vehicles at a concessional duty of 10 percent for five years, and a commensurate increase in the number of vehicles priced at $40,000 or more would be liable to be taxed at 30 percent. A new round of negotiations is expected to start in Brussels in June this year. In view of this, SIAM has released a white paper raising
the issue that India has signed FTAs with several important partners in the last few years and ‘has lost in all cases in terms of trade balance with respect to the automotive industry’.
The conundrum In India, the automotive industry contributed to almost Rs 40,000 crore in excise revenue alone. Going by this, it seems unfair that the Indian govern-
ment has not been highly active in promoting the welfare of the automotive sector at a time when figures are at an all time dismal low. All the developed countries e.g. Japan, EU and USA have protected their automotive industry during the time their industry was in the developing stage. Even now, EU maintains high duty on cars imported from Japan! The taxes imposed on shipping cars to Germany from Japan are high. Import duty comprises 10 percent of the cost of the vehicle added to freight charges to the city of destination and the insurance on the freight. Value added tax which is 15 percent of the purchase price added to freight costs and import duty is yet another tax imposed. This is against zero duty import allowed by Japan for German cars. If the cars are imported as completely built units (CBUs) or fully built up, or even semiknocked down, it would mean a higher demand for those cars, thus leading to a reduction in manufacturing activity in India as usually happens in any other country where there have been a significant increase in import of cars. For example, Australia
reduced import duties from 17.5 percent in 1999 to 15 percent in 2000 and 10 percent in 2005 and as a result its domestic production has stagnated. While the number of imported vehicles has jumped from 11 percent of new vehicle sales to 66 percent in 1999, domestic manufactured vehicle sales declined from 325,216 in 1987 to 302,615 in 1996 and further to 271,500 in 1999. In 2002, the local production was 350,000 against a domestic market of 825,000. Since a third of domestic production is exported, the share of imported vehicles in the domestic market has increased to over 70 percent. Currently, with further lower duty, import content has further gone up to over 75 percent.
A proportionate mix Manufacturing being labour intensive, it is pertinent that one creates employment which further buoys economic growth. Within manufacturing, the auto industry is a unique industry with a long value chain of Tier1, Tier-2, Tier-3 vendors, dealers and service workshops, ...
Contd. on Pg 8
HMSI seeking to grow 150 pc in 100-110 cc
DATA MONITOR Top 5 Car Makers Company
Mar-12
Mar-13
Change
Maruti
1,12,724
1,07,890
-4.29%
Hyundai
39,122
33,858
-13.46%
M&M
25,344
28,432
12.18%
Tata Motors
43,244
22,500
-47.97%
TKM
18,220
19,452
6.76%
Mulls fourth plant in India; third plant to become operational in May. Nabeel A Khan New Delhi
H
Top 5 Car Exporters Company
Mar-12
Mar-13
Change
Hyundai
20,107
22,579
12.29%
Maruti
13,228
12,047
-8.93%
Nissan
11,294
10,159
-10.05%
Ford
3122
2228
-28.64%
TKM
812
1,691
108.25%
* Source: SIAM/ ** Excluding exports/ *** all sub segments considered/ ^ excluding MRPL
Keita Muramatsu, President & CEO and Yadvinder S. Guleria, VP (Sales & Marketing), HMSI, at the launch of the new bike, Honda Dream Neo.
onda Motorcycle and Scooter India (HMSI) has launched a second motorcycle in the Dream series, the 110cc Dream Neo. With this, the company is hoping to grow over 150 percent in the 100-110cc motorcycle segment YoY. The Japanese auto major is also evaluating locations to set up its fourth plant in India. Currently, HMSI has two plants running at full capacity, while a third plant is expected to be oper-
ational in Karnataka soon. Honda say they will be able to sell three lakh Dream Yugas and five lakh Dream Neos in this financial year. Talking about Honda’s strategic direction, Keita Muramatsu, President & CEO, HMSI, said, “Dream Neo is Honda’s next big leap towards creating deep inroads into the Indian commuter segment. Our newly opened technical centre comprising R&D, engineering, purchase and quality team, overcame the ...
Contd. on Pg 8