Here is some good news for the Indian automobile industry which is currently experiencing a slowdown in sales; import tariffs for few critical components are slated to fall by 50 per cent, thus reducing the total input costs for vehicles. This will be applicable for components which are being imported from the ASEAN block.
Components like suspension system, gears, airbag, seat belt, brakes, and fuel system will attract lower tariffs. Car manufacturers such as Honda, Suzuki, Ford, Nissan, and Toyota who import many components will get benefited by this move.
The tax will be reduced to 5 per cent from the existing 10 per cent from January onwards. It will be finally eliminated when total exemptions under the Indo-ASEAN free trade agreement (FTA) for these critical parts takes effect in December 2013.
"It's a big relief to maintain a healthy cost structure. The benefits coming from lower cost will help us improve our bottom lines, which are under considerable pressure due to currency fluctuations. But these reduced tariffs may not be enough to offset the impact of the depreciating Indian rupee that has forced us to increase prices from next month.” said Toyota Kirloskar Motor deputy MD (commercial) Shekar Viswanathan.
For a long time now, automakers have been trying to cut costs and pass on the benefit to the customers (cheaper to produce, cheaper to buy). With this new tax structure, it will be a win-win situation for both, the car maker and the consumer. Once this tax structure is implemented, it might give the automakers like Toyota and Suzuki, who recently announced a hike, a chance to roll back their prices.