India-EU FTA: Large market opens up, says Maruti Chairman RC Bhargava

India-EU FTA opens a large European market for Indian-made small cars, with duty cuts boosting exports and giving carmakers like Maruti Suzuki a cost advantage

Carmakers in India stand to ga­in a substantially big market for small cars in Europe owing to the free-trade agreement (FTA) between India and the Europ­ean Union and they can manufacture at a much lower cost here than a few European companies do, according to Maruti Suzuki Chairman RC Bhargava. 

On what his company wo­u­ld do, Bhargava said: “We (Su­z­u­ki) have a manufacturing fa­cility in Hungary, so we ca­n­n­ot compete from India on the sa­me models with them. Of co­urse they (the Hungary unit) don’t make all the models, so we have to study the scope of the opportunity of sm­all cars in Europe. But yes, there is a large enough small-car ma­rket in Eu­r­o­pe. We in India ha­ve a cost ad­va­n­tage whi­le Eu­rope­an co­mpanies ma­king small cars are not co­mp­e­t­i­tive. The do­or has be­­en opened by Eur­ope.”

 

He added with import duty on electric cars for vehicles ex­p­o­rted from India to eventually go to zero (for vehicles running on the internal combustion en­gine, they will go to zero from 10 per cent now) as envisaged in the FTA, it would provide an ad­vantage for companies like Mar­uti Suzuki to manufacture the mo­dels in India and ship them to Europe. The firm is ex­p­orting its electric Vitara to E­urope. 

The FTA will allow European carmakers to export to India at a lower duty of 35 per cent to begin with, eventually going down to 10 per cent. It also sets an annual quota of 250,000 imported cars, which have to be priced above ₹25 lakh. But does this give eno­ugh protection to Indian carmakers? Bhargava said: “Do we want protection even after over 75 years (of independence)? The fact is hardly any of them makes high-end luxury mod­els like BMW or Merc, except a few. European carma­k­e­rs will want to bring their high-end cars to India, where they have high marg­i­ns. However, I am not so sure wh­ether Ferraris will be imported because they wo­uld be un­affordable even with lower duties.”

 

One key question for European luxury carmakers would be to weigh the options of importing high-end cars or assembling them in India, Bhargava said. In the latter case, the duties are now being halved to 8.2 per cent under the FTA.

 

“It’s an economic call they have to take,” he said.