India’s high import tariffs that more than double the cost of foreign-built cars are under scrutiny from the government.
Commerce Secretary Dr Rahul Khullar has warned the domestic auto industry that it can’t carry on “living behind very large protective tariff walls.”
Import duty on CBU imports is 106%; on CKD units it averages 60% while components shipped from abroad attract between 7.5 to 10% tariffs.
India is currently negotiating free trade agreements with both the EU and Japan and Dr Khullar, briefing reporters in New Delhi, said that some protection for the domestic auto industry could form part of any FTA.
But he challenged the industry to come up with a vision of where it wants to be 10 years from now. “It is time to start identifying not what you are good at, but what you should be good at,” he said.
He warned that high import tariffs could not stay indefinitely because if they did, the global auto industry “would move elsewhere.”
The Indian auto industry was lagging behind in technology and would need to move to hybrids and EVs if it wanted to compete on the world stage.
But Dilip Chenoy, head of India’s auto manufacturers’ association SIAM said that lowering tariffs would drive business to other low cost countries like Thailand which imposes a 90% tariff on car imports.
“With lower tariffs at home companies will prefer importing cars and components manufactured in such countries to India,” he said.