The quota of 2.5 lakh automobiles for imports from the European Union (EU) on lower duties has a carve out for electric vehicles (EV) and the Free Trade Agreement (FTA) also reduces duties on completely knocked down kits (CKDs) being imported into the country for assembly, officials said Wednesday.
The quota for cars with internal combustion engines (ICEs) has been kept at 1.6 lakh while for EVs this quota is 90,000 units. The quota for EVs will come into force in the fifth year of operationalisation of the FTA, officials said.
The FTA will reduce duties on a fixed number of vehicles to 10% from 110% over five years. As the duties go down, quotas will go up gradually. These duty concessions would be available only on those cars that have a landed price of 15,000 euros and above.
CKD Kit Liberalisation
Apart from fully built cars, India has also allowed imports of 75,000 completely knocked down kits for ICE vehicles at 8.25% duty instead of 16.5% now. In return for this liberalisation the EU will offer 2,5 times the quota on completely built cars to India.
EU’s offer on Indian cars is 6.5 lakh fully built units annually, officials said. The EU will offer complete liberalisation on CKD for ICE, hybrids and Battery Electric Vehicles (BEV) or fully electric vehicles.
For cars priced between 15,000 euros and 35,000 euros, India will reduce import duty to 35% in the first year of the pact’s implementation, with a quota of 34,000 units. In this band, India’s market is about 2.5-3 lakh units.
Premium Segment Quotas
For cars priced between 35,000 euros and 50,000 euros, and those priced above 50,000 euros, the duty will be reduced to 30% in the first year, with a quota of 33,000 units each.
The total quota in the first year will be 100,000 units.
The reduction of duties on CKDs will come as a boost to the European car makers like BMW, Mercedes Benz and Audi with duties slashed by half and more than 90% of the vehicles sold by them in India are assembled locally.
“Liberalising CKD imports will encourage European original equipment manufacturers to set up local assembly lines. This serves as a stepping stone – moving foreign OEMs from importing to assembling to full localisation as they build local supply chains,” the official added.