Most European luxury cars won't get cheaper in India, Pg14

Key Highlights:

• India and the European Union (EU) have finalized negotiations for a Free Trade Agreement (FTA).
• Tariffs on European-made cars imported to India will decrease from 110% to 10% over time.
• Indian auto stocks like Mahindra, Hyundai, Maruti, and Tata experienced a dip due to concerns about increased competition.
• The tariff reduction primarily applies to Completely Built Units (CBUs), which are fully imported cars.

Detailed Insights:

• The tariff reduction from 110% to 10% applies only to CBUs, while most European cars sold in India are Completely Knocked Down (CKD) units assembled locally.
• The current duty on importing CKDs is around 16-17%, and any reduction in this duty due to the FTA is still uncertain.
• Brands like Mercedes, Audi, and BMW may not experience significant price reductions as they primarily use the CKD route.
• Ultra-high-end cars from brands like Porsche, Lamborghini, and Ferrari, which are imported as CBUs, might see some price cuts.
• The rupee's depreciation against the Euro could offset the benefits of lower import duties on CBUs.
• The FTA is a significant achievement amid geopolitical challenges, especially with the US being cautious about a trade deal with India.
• Previous India-EU trade talks faced obstacles due to politically sensitive topics like tariffs on cars and car parts.

Key Concepts Involved:

• Free Trade Agreement (FTA): An agreement between two or more countries to reduce or eliminate trade barriers.
• Completely Built Unit (CBU): A car that is fully manufactured and imported as a whole.
• Completely Knocked Down (CKD): A car that is imported in parts and assembled in the destination country.