Mumbai, Feb 6 (SocialNews.XYZ) Indian auto component manufacturers are likely to enjoy more access to European markets with improved price competitiveness under the proposed India-EU Free Trade Agreement (FTA), a report said on Friday.
The report from ICRA said that "tariff rationalisation and preferential access are expected to enhance pricing competitiveness and sourcing opportunities with European original equipment manufacturers (OEMs)".
The EU is a major automotive production hub and better trade terms could help Indian suppliers deepen participation in global supply chains, the report said.
It could help domestic component manufacturers compete more effectively with suppliers from countries that currently enjoy tariff advantages in the region, the ratings agency noted.
Automobiles and components currently make up about 3 per cent of India’s exports to the EU, leaving room for expansion as barriers ease, the report said.
ICRA highlighted that the FTA includes a phased reduction in import duties on EU‑origin completely built units (CBUs), with tariffs falling from as high as around 110 per cent to roughly 10 per cent within specified price thresholds and quotas.
The change is expected to mainly affect premium vehicle segments while leaving mass‑market passenger vehicles largely insulated, the report said.
The report added that EV tariffs are likely to remain unchanged initially, giving domestic EV supply chains time to adjust to evolving trade dynamics.
Further, improved market access could encourage investments in precision engineering, electronics integration and specialised component manufacturing, and encourage technology collaboration and product diversification with European manufacturers.
"Export-focused mid-sized firms and MSMEs engaged in specialised components and aftermarket products could see improved access to European buyers as sourcing bases diversify and procurement strategies evolve within global automotive supply chains," the report noted.
Regarding imports to India, the report said the tariff cuts are likely to only benefit premium internal combustion engine (ICE) vehicles, with small or mid-segment cars remaining largely unaffected.
The EU is granting India preferential zero tariff access on 97 per cent of its tariff lines, covering 99.5 per cent of India’s export value. India will eliminate or cut tariffs on 92 per cent of its tariff lines.
Source: IANS
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