Toyota, Honda, Suzuki, Ford and Nissan said to be major beneficiaries

The reduction in tariffs on specific auto components imported from ASEAN regions into India from January is likely to give some respite to the dwindling domestic automobile industry, reports the Times of India. Shekar Viswanathan, Deputy Commercial Managing Director at Toyota Kirloskar, was quoted as saying, "It's a big relief to maintain a healthy cost structure. The benefits coming from lower cost would help us improve our bottom lines, which are under considerable pressure due to currency fluctuations. But these reduced tariffs may not be enough to offset the impact of the depreciating Indian rupee that has forced us to increase prices from next month." The tariffs will be halved to 5% from the present 10%. The parts will include major components such as brakes, gears, airbags, fuel tanks, suspension system, steering systems and seat belts.

Significance: The major beneficiaries would be Toyota, Honda, Suzuki, Ford and Nissan. The ASEAN bloc is India's largest trading partner. The tax would finally be eliminated when total exemptions under the Indo-ASEAN free trade agreement (FTA) for these critical parts take effect in December 2013. Indian automakers have been increasing imports from ASEAN and China to drive benefits of cheaper priced components. According to a study conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI), imported auto components form over 30% of the total Indian domestic market. Imports from ASEAN countries have been rising, with Thailand leading in the list. It is emerging as the largest exporter of engines. Currently, Japanese automakers account for over 50% market share in India. These companies import several auto components from Thailand and Japan. They also export many critical components and cars to these markets. For instance, Maruti Suzuki exports loose components for its multi-utility vehicles Ertiga to Indonesia. It also plans to increase its trade with more countries in south-east Asia. Meanwhile, Indian passenger car sales declined 8.25% year-on-year (y/y) in November as the festive season spirit failed to prolong enthusiasm among consumers. The overall slow economic growth of the country and the fact that consumers are becoming more insecure about their jobs have compounded problems, which has hit the entry-level small-car segment in particular.

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