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-   -   After Trump, EU seeks 0% tariffs on car imports to India (https://www.team-bhp.com/forum/indian-car-scene/293010-after-trump-eu-seeks-0-tariffs-car-imports-india-4.html)

If tariffs are removed fully, the poor and developing countries will suffer most. For a country like India with huge population this can be disastrous with huge job losses.

On the other hand there will be explosion of demand in the luxury market if tariffs are removed. There is a big chunk of upwardly mobile, willing to spend class of people waiting to find value in the 40-80L market. Also this move will make import of parts cheaper, bringing down even the maintenance costs significantly.

Have heard about such FTAs for some time, never materialized. In fact, there was a talk around 2012 to drastically reduce import duties on European luxury (and other cars too) by 2018 during Indo-EU trade talks. Needless to say, it never materialized.

I would like to see cheaper European cars for sure and it will be good competition, forcing domestic manufacturers also to raise the bar.

At best, GoI may agree on a quota, a certain number of cars to be imported at lower duty, that too in lieu of relaxation on free movement of labor or some other goods. Highly unlikely they will open the flood gates (probably rightly?).

But even in this scenario, I don't expect to see the prices of European (luxury or any) cars going down. The government will increase the excise duty or some other tax to keep the price level same. Remember, the crude oil became much cheaper lately and with the concomitant excise duty hike the GoI ensured consumer paid the same price at the petrol pump.

May be I am too cynical about our government, I hope I am wrong this time.

It will be good if government can keep EU at bay, 2 more years anyways the likes of Volkswagen, Stellantis are going under the water. They themselves will come running to India. We shouldn't give them a lifeline now.

Japanese understood this 10 years back, Europeans will in next 2 years

Purely as a customer, I cannot even use a simple configurator for some options like wheels and trim, due to the overt emphasis on scale which obviously follows local manufacturing.

With rationalised duties, cars in the D segment and above can benefit from better choices (they are hardly a spec in the overall market anyway). The atrocious price premium (in India) is more apparent in premium cars which hardly compete with homegrown players.

The Socialist era mindset of sinful goods continue to dictate what is right for our country.

Yet, the European car makers are lobbying fiercely to sell more cars in India at lower import duties.

Why? Because they are desperate for a market. The fast Chinese transition to EVs has left them with a massive hole in their sales, profitability, and ability to compete to the point that large parts of Europe's car industry are now scared about a permanent decline and write-offs on ICE manufacturing assets. With impossible-to-cut labour costs in places like France and Germany, they need volumes keep their heads above the water. Else they will start making losses large enough to erode credit ratings, raising interest costs and pushing them faster towards bankruptcy.

This is the right time to cut a deal with the EU. The Indian govt can initially take a hard line on sectors they want like automotive, to allow us to sell them a different deal:

1. EV components - the Europeans have failed to create local low-cost EV battery manufacturing at scale. Northvolt is dead. Euro EVs software used to be horrible, has improved, but still does not have the polish of a Xiaomi SU7. Ask the EU car companies to invest in India for EV battery, motors, power electronics, and EV software, in return for more reasonable duties of ~40% on cars above 35,000 USD. That'll be just 1/3rd of the current duties!. The Europeans get a bigger market to sell to at better prices, and they get a low-cost sourcing base for scaling up EV manufacturing. India gets to advance our EV component manufacturing and exports.

2. Arms and ammunition - Ask the Europeans to include India as a permitted strategic supplier under the new European defence rearmament plan. Europe is planning to buy > 100 billion in arms per year for the next decade or so, and they don't have the capacity to make it all locally in Europe. India already has demonstrated capability in howitzers, personnel carriers, missiles, radar, multi barrel rocket launchers, and now helicopters like Prachanda and light fighters like Tejas. We can also use the opportunity to start making aero engines in India. The French have the tech.

A good 3rd target will be Semiconductors, as Europe has some of the best in high-end chip manufacturing tech, like ASML. Can we get them to do both R&D and manufacturing in India? This one might be tougher than EVs and arms as the benefit to the EU is not clear.

The time window to do a deal may not be long, because China will also offer deals to the EU.

I think @guptad42 has the right idea here. If we were to cut a deal, it would behove us to do so with a longer term strategic outlook. Giving EU OEMs access to Indian engineering and component suppliers for low cost EVs would be a win for them (though it would require Indian OEMs to be up for the challenge and honestly I think it's high time the training wheels come off for them).

But the more enticing strategic outlook is on arms. If Europe is truly pivoting to rearmament, then that is going to be an absolutely massive amount of materiel that is up for the offing. Especially at the low end of the scale, EU countries (provided they can overcome the quite obvious pushback there'd be about breaking foreign dependence on a recalcitrant USA for arms from another foreign supplier, India) could come shopping to India. We probably have the scale and tooling for the simple stuff needed en masse for the kind of war Europe is likely to be engaged in with Russia.

On the semiconductor front, this is where the retrenchment against global supply chains really hits the biggest bottleneck, despite Trumps best efforts. You've correctly named ASML, who are the de facto only company capable of the EUV lithography machines required for the 4 nm or so scale chip sets that comprise the bleeding edge. There's really no other competitor to them - though you hear of Chinese efforts to come up with their own lithography machines. Semiconductors is one space where there is seeming agreement within the EU bloc that they need to retain what lead they have there and fiercely protect domain champions like ASML.

Semiconductors aside though, I think the the broad premise of guptad42's post holds true. My main concern is knowing how the Indian defence establishment in particular works: there's very little joined up thinking between dept's and central planners, let alone long term thinking and planning. Thus you see the constant piecemeal acquisitions and programmes with many conflicting attributes or gaps in capability. I'd really pray that in any trade deal discussion, the different departmental mandarins can work in a coordinated manner.

Dhanush, the current de-facto "indigenously" developed howitzer is based on blueprints of, hold your breath, Swedish Bofors design which the Swedes started developing in 1960s!

https://en.m.wikipedia.org/wiki/Dhanush_(howitzer)
Same is true with Indigenous guns (INSAS), being replaced by Russian AK-203, originally designed in 2007.

There is a reason we import most of the defense hardware, and I hate to say that, indigenous hardware is sub-standard mostly. Tejas? Even IAF chief recently dismissed it as poor. We don't have the single crystal tech to make best turbines to get the competitive thrust. And I am not even talking about inordinate delays in execution.


Why will EU ever buy such equipment?
ASML? The EUV is so advanced that no-one is able even come close to it (Korea/Japan). WHy will they even share it with us?

Patriotism is good, but we should be realistic

These are valid points. What I forgot to add is essentially where I think there's value for the EU and India is in the really dumb materiel. Just as Russia has turned to North Korea for it's vast stockpiles of ammunition to help maintain the sustained fires in their Ukraine invasion, I think India too could help scale up for cheap artillery shells for eg. European war planners have had their eyes opened to the fact that post Cold War peace dividend stockpiles are woefully insufficient in a ground war against Russia. The EU won't be able to produce artillery shells or bullets at the price point that presumably India could supply or indeed the volumes. If anything extra supply from India could bolster their own reserves so it's still a win for them logistically.

Now I've said all this but we've not considered whether any hypothetical Indian materiel supply stems the usual moral lecturing from some in the EU but you'd presume that there'd be less of a leg to stand on for those who prefer to do so.

Thing is though ultimately getting a deal with the EU is going to be Such a slow moving process given the many stakeholders there. I wonder what the hierarchy of preference and/or priority is in terms of the FTAs India is currently working on?

The time has finally come when the government should think about reduction in import duty. As far as competition for domestic car manufacturers is concerned, i say that if one wants to buy Mercedes, Audi or BMW they buy that cars only. In anycase, the domestic car manufacturers are not operating in the same price range as that of Mercedes, Audi or BMW and thus reduction of import duty makes sense. Reduce it and bring it at par with other countries in south asia.

Why give impetus to failing brands. Let EU brands tank which they already are with falling sales and market capitalization giving us opportunity to go shopping. People don't know but just after 2008 EU went asking same deal with China which China promptly rejected.

2 years later Volvo, MG, Saab were all Chinese

We might very well need to.

It's actually a golden opportunity to use this to our advantage. We have to rationalize direct import duty in automobile sector specially parts up the value chain like engine transmission or motors, controllers in case of EV's . Today most complex manufacturing involves multitude of parts ( a single TC consists of more than 700 different big, small parts with different parameters ) . We have been emphasising on assembly but we need to add more value in manufacturing. There is no reason why Mexico or Thailand can't be emulated. We have missed the ICE car opportunity but can still be in the race for EV factories. Taxation on input parts have to be minimal for industries to have confidence across the supply chain. I recently saw an article where a TC for one of the most famous pickups crosses the two North American border six times (both including Canada and Mexico) to be finally assembled at a Ford plant. If we can just get the taxation right for large scale manufacturing .
We missed the COVID period where supply chains were getting reset . It might be too late for ICE , as I understand we still import all automatic transmissions in all our cars irrespective of the vendor.
For EV there is still quite an opportunity, all the traditional giants are still not producing EVs at scale
As far as direct CBU's are concerned any duty over 25% is just plain irrational. If the domestic industry need 80 to 120% duty to compete then they very well should quit making these products . These duties have been high for far too long and there has been no increase in local competitiveness . It has made the whole domestic industry complacent
China's strategy of equal JV's have worked wonders for them at least in the automotive sector.
Once you start having these companies establish bases here to do actual manufacturing and not just assembly there is a high chance more people get exposed to best practices and know how and then start indigenous companies . The number of EV companies in China is an example albeit an extreme one . Today manufacturing in China is not limited to low end product but high end stuff that just ten years ago would not have been possible in the developing world.
They have been consistently taking bigger risks from the policy side and it's paying off for them .
Apart from high end jet engine used in fighter planes they have very few areas where they actually lag .
While we work on our indigenous Kaveri engine they have at least 10 different prototypes of different jet engines with different thrust parameters they are not their yet but will be in a couple of years. This sort of thing is only possible if you actually have a manufacturing knowhow. We are still in talks with Russia for upgrading the diesel engine in our mainline tanks.
We have traditionally only been reactive in policy terms if we play it right the struggling European automobile sector might get a real fillip here to reduce there dependency on Chinese parts .
Infact we should have allowed the BYD plant , in any case we are running a trade deficit with China and any dependency that it brings would have worked both ways .

This is a good one, lots of money to be made in arms sales.

In the interest of fairness, the title of indigenously developed howitzer belongs to ATAGS or Advanced Towed Artillery Gun System.
An order for 307 guns for Indian Army service was placed recently, with production handled by Kalyani Strategic Systems Limited (KSSL) and Tata Advanced Systems Limited (TASL).

These guns have been exported to Armenia too, along with Swathi Weapon Locating Radars, Aakash surface-to-air missile batteries and Rajendra radars to guide those missiles. All of these systems are indigenously developed.

That used to be true in the past, our imports have declined by 9.3% between 2015-19 and 2020-24 according to SIPRI or Stockholm International Peace Research Institute.

In the same timeframe, our defence exports increased by over 950%.

As for the quality, Yes you're correct, the PSU built hardware didn't have a reputation for good QC. Thankfully that seems to be changing with the entry of private firms in defence equipment manufacturing.
For instance, a firm called Solar Industries manufactures rockets for Pinaka MLRS (Multi Launch Rocket System). Ever since they've taken over production, they've improved production efficiency and quality of the system.

And no, the IAF Chief did not dismiss the Tejas as poor, he said HAL's track record of delivering aircrafts on time is poor.
Big difference there.

EU has a plan of increasing production of 155mm artillery shells to upto 2million in a year, not all of this can be produced in EU though so imports from various countries is being considered. This is where India can step in.

DefenceNews | Czech artillery shells acquisition; a lesson for Europe

Munition India Limited supplies these shells to UAE, Vietnam, Czech Republic and possibly Poland.
Some of these shells have made their way to Ukraine as well.


bulgarianmilitary.com | Ukraine using Indian shells for Polish SPGs

Then there's Estonia, who is considering collaborating with India to co produce air defence radars. For this role, there's the indigenous Arudhra and Ashwini radars that can be offered.
IDRW | Estonia eyes collab with India for radars

Similarly France is evaluating the Pinaka MLRS to replace their M270 rocket launchers (most of which hav been donated to Ukraine now).
ArmyRecognition | France evaluating Pinaka

And lastly, Greece was considering integrating Indian weaponry such as the Astra BVRAAM (Beyond Visual Range Air to Air Missiles) and SAAW (Smart Anti Airfield Weapon) on their Rafale fleet.
defence.in | Greece exploring affordable Indian tech for Rafales

Interestingly, it's USA that's grabs the largest pie of our defence exports. KSSL supplies 155mm artillery gun barrels to an American firm.
TASL has been manufacturing and supplying empennages, fuselages and wings of C-130 transporter, Apache helicopters and F-16's respectively for a while now.

Doesn't sound far fetched now does it.

Fingers crossed for this one.

____
The military world surely loves it's acronyms lol:

My original point was and remains, there is no worthwhile defense component from India worthy of consideration of an EU wide deal.
The examples mentioned are with small countries, cost conscious ones and some others may be just a part of deal to "reciprocate" the defense purchases from India.
And our defense export based number is very small so a long way to go. And I don't expect IAF chief to openly criticize HAL or Tejas.

I routinely come across resumes from ISRO/DRDO and almost all of them are worthy of trash. I don't expect much from government organisations. I sincerely wish they shine but untill they are free from clutches of government, nothing is going to change. Mediocrity at best. But again, this is a digression from the original point.

I fail to understand, who is GOI trying to protect, the sub $20,000 market that has the bulk of the sales here in India, is virtually dead Internationally, I don't see any obvious reason for not lowering duties for ICE cars, if anything it'll force our homegrown manufacturers to do away with their shoddy workmanship, and maybe even put a full stop on the sales of some Marutis or as I like to call them coffin on wheels

On the China factor, I don't know why we have this stigma, people are just not willing to accept that China is significantly ahead in EV tech and is making probably the best bang for buck cars in the world, instead we are busy poking holes in their success, we aspire American cars like anything, as if they are a gift from the heavens above, I see people reporting faults in the new Mahindra EVs and comparing them to tesla, what we fail to realize, is that Tesla is also notorious for its quality control, all American cars in general are awfully unreliable, if anything we should be proud of our Indian Manufactures for getting so many things right on the first try.

I believe the lowering of tariffs can provide a significant economic boost as well, cars are aspirational buys, people are more than willing to empty their pockets for a good car, seriously now, who here would say no to a 60L Porsche, instead of providing lollipop tax breaks just for political benefits, GOI should focus on getting rid of our socialist past.

Sorry for going off topic, but on that tax break, whatever gazzilion crore rupees, the government gave back to the public, please tell me, whoever here is sound in economics, that how is that not a complete loss, like that money is not coming back into circulation, most people will put in an FD or something, don't know who they consulted before doing this but I'm sure he/she must be good at their job, but from where I am sitting, it looks like someone screwed up.

As for the repercussions, to the industry, I feel it may suffer for a few years but in the end it is us the consumers who will benefit, and it's not like everyone will stop local production and just import fully built units, companies realize the cheap labour and cheap manufacturing capabilities of India, till now the only hurdle they faced was justifying the initial cost to set up a factory, because initially they would import, the car would be priced exorbitantly, it wouldn't do the numbers, and on paper it wouldn't make any financial sense to build in india when the local sales were so slow, it was like a vicious cycle, and from what I heard, Tesla, Ford, Porsche were also stuck in the same cycle, You cannot justify putting down half a billion on the back of a few hundred units and future growth.

Sorry for the long post, mods feel free to edit out any irrelevant points, but I have been waiting to get this off of my chest for a while now, the frustration has been building up for months.

Eager to hear everyone else's thoughts on this
Cheers

[Off-Topic]

Let's see beyond the tariffs on car imports.

The strong sectors of the EU are the Automotive industry, Machinery & Engineering and High-Tech Manufacturing. As of now, most of these sectors are bleeding because of tariffs, production costs and technology embargoes (especially to China).

EU wants a good market for their consumer products and immediate weapons upgrade for their military. We need their assistance in getting their cutting-edge technology transferred here.

So, India can reduce tariffs to a certain minimum to have its top 5% citizens get affordable luxury cars and also get the EU to make India their manufacturing base for high-tech machineries such as aircraft engines, semiconductors, etc.

Now, understand that we might not be getting their latest technology, but even a previous generation technology will be a big boost to India’s manufacturing landscape.

Making things from scratch will have quality issues and might not be on par with foreign manufacturers who have already cracked the code in making them perfect. That's the reason a joint venture will benefit both the EU and India in all these sectors.

Time is of the essence here. India needs a big and immediate leap in high-tech manufacturing to tackle the China factor. The EU needs a reliable partner to replace China as well as the US and to help them manufacture weapons and other equipment/components at a faster pace than their manufacturers.

With the tariff war started by the US, India has to place herself in a position to gain all the momentum in getting as much ToT and manufacturing with as minimal impact as possible on its economy.

We need compromises as well as cooperation to grow into economic sovereignty.

Hoping for the best for India and car buyers!!! :)