Auto stocks slide as India-EU trade deal signals sharp cut in car import duties

Auto stocks fell on Tuesday after reports said India is close to sealing a free trade agreement with the European Union that could sharply cut import duties on foreign cars.

The Nifty Auto index declined 1.25% to 26,469.40. Mahindra and Mahindra led the losses, sliding 3.47%. Maruti Suzuki India fell 1.81%, while Tube Investments of India declined 1.61%. Other stocks in the red included Ashok Leyland down 1.03%, Tata Motors Passenger Vehicles down 1.00%, Exide Industries down 0.48%, Hero MotoCorp down 0.35%, TVS Motor Company down 0.18%, Bajaj Auto down 0.10% and Bosch down 0.09%.

Media reports said India plans to cut import tariffs on cars from the EU to 40% from as high as 110%. The move is part of a broader trade pact that could be announced as early as 27 January. The Narendra Modi government is said to have agreed to immediately lower duties on up to 200,000 European cars a year priced above 15,000, or about Rs 16.5 lakh. Electric vehicles are excluded.

Over time, tariffs could fall further to 10%. That would significantly ease market entry for European brands such as Volkswagen, Mercedes-Benz and BMW. European players currently hold less than 4% of Indias car market, which is dominated by Suzuki Motor, Mahindra and Tata Motors.

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