Shares of Indian auto companies, including the likes of Mahindra & Mahindra, Tata Motors, Maruti Suzuki and Hyundai Motor India, are all falling in trade on Monday, amid reports of India slashing auto import tariffs for European carmakers, as part of the Free Trade Agreement with the European Union (EU).
The sharp fall in these auto stocks is led by M&M, which is trading with cuts of more than 4%. Tata Motors, Hyundai and Maruti Suzuki have all corrected more than 1% in trade, as investors fear reduction of import tariffs could potentially impact the luxury car market in India.
The weakness in auto stocks can be linked to a Reuters report over the weekend, which said India is planning a major cut in import tariffs, marking the biggest ever easing in the country’s tightly-protected automobile market. The import tariffs for EU carmakers could be slashed from 110% to 40%, thus offering greater market access for European companies to one of the fastest-growing automobile markets in the world.
Given that the EU is already home to some of the biggest car brands in the world, including the likes of Ferrari, BMW, Mercedes, Audi, Volkswagen and Lamborghini, among others, the move could have serious implications for India’s premium automobile market.
The Reuters report adds that the initial tariff cut will apply to a limited quota of around 200,000 combustion-engine cars annually, with a minimum import price of over 15,000 euros. This structure is designed to primarily benefit premium European brands such as Volkswagen, Mercedes-Benz and BMW, which have long sought easier entry into the Indian market.
It must be noted that battery electric vehicles (EVs) could be excluded from the import tariff cuts for the first five years of the agreement, thus protecting the nascent and developing market for the EV space, led by the likes of Mahindra & Mahindra and Tata Motors.
