No reason for high tariffs on cars from UK, EU: Maruti Suzuki's RC Bhargava

Maruti Suzuki chief says costs of many models 20-30% lower in India

Supporting a reduction in high tariffs on cars imported from the United Kingdom (UK) and European Union, Maruti Suzuki Chairman R C Bhargava is of the view that the Indian auto industry is as competitive as those there and there is no reason why high tariffs are required to protect the domestic industry.

Responding to the demand made by the UK government for a reduction of import duty on cars in its negotiations on the India-UK free-trade agreement (FTA), which has become prolonged due to opposition from some carmakers, Bhargava said: “My views may not be shared by the industry, but we are as competitive as the UK and EU in cars, and in many models our costs are 20-30 per cent lower in India in my estimate. So there is no reason why import tariffs on cars cannot be reduced as sought by the UK government under the India-FTA negotiations. I think 30 per cent duty is fine.”

Also, Bhargava does not think there is any reason to have a quota on the number of cars that can be exported by the UK at a lower tax rate.

Society of Indian Automobile Manufacturers had reportedly floated a suggestion last year for eliminating import tax on a limited number of cars from the UK in a phased number. 

The plan was to reduce duty to 70 per cent from 100 per cent and then to 10 per cent in the fifth year for a maximum of 46,200 vehicles. It had agreed to go down to a zero per cent tax regime but with a cap on the number of vehicles.

In the last Union Budget, the duty on CBU (completely built units) cars with a CIF (cost insurance and freight) value under $40,000 was increased from 60 per cent to 70 per cent, and those above that was at 100 per cent.

In the case of electric vehicles, in CBU form with a CIF value of more than $40,000 duty was increased, again from 60 per cent to 70 per cent.

Bhargava pointed out the fact that companies like Maruti Suzuki were exporting 700,000 cars a year was a testament to the fact that India was globally competitive.
 

He said Suzuki in Japan, for instance, exports small cars through Maruti Suzuki, to Africa and West Asia because it was cost-competitive to do so.

Toyota is making small cars in India through Maruti even though Daihatsu in Japan can also produce them. This is because in India it is cheaper to produce. Similarly, the production of the five-door Jimny of Suzuki has shifted to India and it has become a base for export of the model across the world.

The chairman of Maruti Suzuki conceded the point that there was a time when India was not competitive because production volumes were low. But now India has become the third-largest automobile market in the world and companies have got scale with reduced production costs, despite still having some disabilities.

Not only that, it has the support of a vibrant auto-component industry which is exporting all across the world and is cost-competitive again.

On the entry of Tesla and reports of it asking for a substantial duty reduction on CBU cars, Bhargava said: “Tesla is bargaining for the best deal. It sees India as a large market in the future. But whether it has special requirements I am not so sure. But I believe concession has to be given to everyone in the industry.”