Effective January 2013, the import duties for components imported from the ASEAN region have been halved to 5 percent from the earlier 10 percent. Also according to Indo-ASEAN Free Trade Agreement (FTA), this duty will be completely eliminated to 0 per cent by December 2013. Thus car companies like Suzuki, Honda, Toyota, Nissan and Ford will benefit with cheaper spares and lower production costs. These companies import many components like brakes, gears, airbags, fuel tanks, suspension system, steering systems and seat belts from this region as well as many engines, especially diesel engines.
Thus these companies will benefit from reduced components cost, which were suffering due to fluctuation in the Indian Rupee as well as the global economy. So these companies can better control cost of their cars as well as spare parts. Some companies have given new contracts to companies in the ASEAN region and China, as opposed to earlier companies from Japan to benefit from this move. Thailand currently is the leader in this region as far as exporting components and engines to India is concerned.
Many of these Japanese car manufacturers were exporting cars and components from India to these ASEAN countries thus making trade in the opposite direction beneficial to. Currently the Japanese manufacturers account for 50 percent car sales in India and almost 30 percent of the components come from the ASEAN region. So companies like Toyota and Honda will be able to keep their costs under control which will help them price their cars even more competitively.
This move by the Indian government will benefit both the automobile industry as well as the Indian population as cars and bikes will be priced more aggressively and costs of spares and repairs will come down too. However we have to observe how well car manufacturers pass on the benefits to its customers.
Source – Ecomonic Times
