Carmakers Gear Up To Stall Cheap 2nd Hand Imports

Imports of second-hand cars are to be allowed in India in 2002-2003. The imports will be permissible under India's commitment to remove quantitative restrictions and will be liberalised in the last year of the phase-out period in 2002-2003.

The move is expected to have a disastrous impact on the nascent domestic car industry that was liberalised in 1993. Rajat Nandi, executive director, Association of Indian Automobile Manufacturers, said this would be "very unfortunate for the auto industry and business plans of all car companies will have to be reworked". Most companies have framed their plans keeping a 7-10 year time period in mind. "The industry is just coming into its own and this will be a big blow," he said.

 

He added that the association had decided to launch a study of the implications of the various WTO agreements on India's auto industry, analyse comparable models that can be imported, and the income level and purchasing power of consumers. The association was not consulted on India's commitment to liberalise second hand car imports in 2002-2003. Sources said second hand truck imports would be liberalised in 2000-2002. Government sources added that tyre imports on open general licence had caused a stir and it was likely that second-hand car imports would be opposed. They pointed out that the wheel was set to come full circle, with foreign companies lobbying to restrict imports!

At present, import of second hand cars is on the restricted list and is permitted against a licence in very limited numbers. For instance, non-resident Indians who have been abroad for at least three years can import second-hand cars. Embassies, five star hotels and certain registered tour operators can also import second hand vehicles. The applicable tariff rate exceeds 100 per cent, with the basic duty at 40 per cent. Commercial and passenger automobile vehicles, including two- and three-wheelers are on the restricted list at present. The association argued that the car industry is very capital intensive, and takes at least six years to "settle down". It added that several countries ban imports on environmental grounds.

They feel this will not be a good move since spares and service for many imported models will not be available in India, and there will be no value addition and new technology induction in the country, which will run counter to the government policy for the auto sector. India has not yet bound tariffs on second hand cars. According to sources, these could be kept at a high level to protect the domestic car industry. Second hand car prices, sources said, would vary depending on the currency rates and the year and model of the car. A very rough estimate is that second hand economy model cars would cost anywhere between $7,000 and $8,000, but the figures would be very different in the year 2002-2003, they added.