Trade pact with Japan to make auto parts import cheaper

Once India signs a trade agreement with Japan, the auto parts imports will become cheaper. This will mean a tough competition for the local industry worth Rs 90,000-crore. During the visit of Prime Minister Manmohan Singh to Tokyo, Japan and India made announcements about the result of discussion on the deal. According to this agreement, the 10 per cent duty of India, on the Japanese mufflers and fenders will be dipped within ten years. On the other hand, the five per cent levies on galvanized and hot rolled steel sheets will be dissolved within 5 years. The tariff on the diesel engines will decline to 6.25 per cent from 12.5 per cent over 6 years. The elimination of tariff on the auto parts will support the car makers for lessening the price of acquiring the Japanese components. It is also likely that the cheap imports of high-grade steel might also bring down the costs. 

The auto experts say that this step will definitely support and help many companies like Honda and Toyota which were likely to leverage the cost advantage to extend in India. Toyota intends to import the transmission system and engine for the Toyota Etios model from Japan or Thailand. Vaishali Jajoo, an expert with Angel Broking stated that with the price of acquiring  components falling, the auto makers might forward the profit to the customers. Maruti Suzuki imports a major part of its components from the Japanese market. The local auto parts industry commented that the agreement can result in an inverted duty structure in the coming time. 

The chief of a local component maker said that the government should ensure that the inverted duty structure, wherein, raw material is available at a higher price with a completely finished product, is looked after. Else it would remove their competitiveness in the country. The Auto Component Manufacturers Association (Acma) stated welcoming the agreement that such agreements should be profitable for both countries. Acma executive director Vinnie Mehta said that the trade agreements should be made final with countries where the power of Indian firms can also be implemented. Toshiyuki Shiga, chairman of the Japan Automobile Manufacturers Association, stated that he expects the agreement will help maintain the Japanese auto industry’s speedy business in India.

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