India Lowers ASEAN Auto Parts Import Tax

On December 10, 2012, India announced that it will reduce the import tax on ASEAN auto parts from the current 10% to 5%, effective from January 2013. ASEAN is India’s largest trading partner, and the reduction in import taxes will cushion the increasing production costs of auto parts. Indian car makers are relieved.

Toyota, Honda, Suzuki, Ford and Nissan will be the major beneficiaries of import tax cuts. Tariffs on main components such as brakes, gears, airbags, fuel tanks, suspension systems, steering gear, and seat belts will be lowered. Under the India-ASEAN Free Trade Agreement, these key components will achieve zero import tariffs starting in December 2013.

Shekar Viswanathan, deputy general manager of business operations at Toyota Kirloskar Motors, said that the reduction in tariffs will help reduce costs, but may not be sufficient to offset the impact of the devaluation of the Indian rupee, and car prices will increase next month.

"Some suppliers have already moved their production bases from Japan to ASEAN to enjoy tariff preferences. We are importing spare parts from these suppliers," said Suda Mmaitra, senior executive of Maruti Suzuki, a subsidiary of Suzuki Motors India.

Indian automakers continue to increase imports from China and ASEAN to obtain lower-priced spare parts. A survey by the Indian Federation of Industry and Commerce pointed out that imported auto parts account for more than 30% of the Indian domestic market.

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