Domestic auto industry seeks cars to be left out of FTA with EU

With the resumption of long-stalled negotiations on free trade pact between India and the European Union gaining ground, domestic automobile industry wants cars to be kept out of the agreement. While in the past, EU had demanded on inclusion of cars in the pact, Indian automobile makers had insisted that such a step will be detrimental to the country's ambition to become a global automotive manufacturing hub. According to industry sources, if such a demand from the EU were to be accepted, India has more to lose specially in the post Brexit scenario.

"As the composition of EU changes after Brexit, our interest to export passenger cars to Europe will go down considering the fact that within EU, UK is our top export destination at present," a senior industry official said. India's car exports to UK stood at USD 424 million as compared to a total of USD 1.7 billion to the EU in 2016-17.

There is also apprehension in the automobile industry that if the high tariff barrier on imports of cars is removed under FTA, European car makers will focus on trade rather than investing on manufacturing activities in India, the source added. Such a development will not only put those companies, which have invested heavily on setting up manufacturing plants in India but also hurt investment of Rs 4,50,000 crore to Rs 5,50,000 crore envisaged in AMP (Automotive Mission Plan) 2016-26, another source said.

As per industry estimates, foreign automobile manufacturers have invested around Rs 1,00,000 crore till date in India, generating direct employment of around 1 lakh across several plants. "Let's remember that due to the high tariff regime global manufacturers had to establish their manufacturing units in India, thereby bringing technologies and providing local employment. These all could be nullified," the source added.

The industry players also argued that till date completely built units of vehicles (CBUs) have not been included in any of the FTAs that India have signed, including agreements with ASEAN, Japan, Korea, Malaysia and Thailand. "Therefore, no exception should be made with in the FTA (free trade agreement) with EU," the source said.