Car exports to Europe to be hit.

NEW DELHI: It's just not a sluggish domestic market that Indian car makers have to battle, but their overseas sales also appear to be in danger with import duty to the key European region set to go up substantially from 2014, making overseas shipments costlier.

The hike in duty due to withdrawal of a concessional tariff regime for India and some other developing nations, is being seen as a measure to pressurize the Indian government to expedite the signing of a free-trade agreement (FTA) with the EU with specific concessions for car imports from the region.

EU will withdraw the concessions granted under the Generalized System of Preferences (GSP) from January 1, leading to a hike in duty from 6.5% to 10%.

The proposed move has already rung alarm bells for engineering export body EEPC India and leading carmakers, who fear that overseas sales may come under pressure. "The EU seems to have taken this step as it would like India to take a flexible position in the India-EU FTA negotiation with specific reference to the auto sector," said EEPC India chairman Anupam Shah.

The move has the potential to adversely impact the export of motor vehicles to EU, which amounts to $1 billion, the EEPC said. "The increase in duty will put a pressure on prices. In these times when the global economy is under pressure, this will create additional pressures for sales overseas," said Rakesh Srivastava, Sr VP (sales & marketing) at Hyundai India. Of the estimated 2.5-lakh units that Hyundai plans to export this year, 40% is directed to the European region.

"Europe, while not being a very large portion of our exports, is still critical. Higher prices may impact demand," said a Maruti official, requesting anonymity.

Exports have so far provided succor to car companies, which are battling a slowdown in the domestic market. Domestic car sales are down by around 5% in April-October, 2013-14. However, exports in the same period are up 9%.

"Export volumes are crucial and form a very important part of the business strategy of any manufacturer. They bring in economies of scale, earn foreign exchange," Hyundai's Srivastava said.

Source : timesofindia.indiatimes.com