German carmakers slam India's customs duty hike

German automobile makers are aggrieved at India's decision to raise customs duty on automobile parts at a time when the European Union is seeking to conclude a free-trade agreement with this country.

Germany's ambassador to India Martin Ney has warned that India's Budget proposal to raise duties on automobile parts could backfire at a time when this country is banking on exports to boost economic growth.

Instead of taking protective measures, Ney said, India should negotiate a free-trade agreement with the European Union, adding that New Delhi is also in a very strong position, ''as India already has a trade surplus of nearly $5 billion with the EU''.

German companies have invested $9.7 billion in India since 2000, creating four lakh jobs directly and indirectly and ''bringing 'Make in India' to life'', Ney said, speaking at a press conference on the sidelines of an auto-components exhibition in New Delhi. ''I don't understand the hike in customs duty on auto components. If India wants its GDP to grow at 8 per cent and wants to increase exports, then it needs to allow easy import too,'' he said.

Meanwhile, Klaus Braunig, managing director, VDA (Verband der Automobilindustrie), which has over 600 members representing manufacturers of cars, trailers, bodies, and buses as well as parts and accessories, said India will overtake Germany in passenger vehicle sales this year if the current trend continued.

India is on a growth path, and with growing GDP and industrial production combined with falling inflation rate, and with just over 1.3 billion people there is a considerable potential for a big jump in automobile sales in India, Braunig said.

He was addressing the media at the Auto Expo 2018. VDA has set up a German pavilion at the Auto Expo, for the seventh time, with the slogan 'Made in Germany'.

''In 2018, the Indian passenger car market will overtake the German market in terms of volume for the first time. Between 2014 and 2017, this market grew by a good quarter (over 26 per cent) to 3.2 million new cars. In our forecast, we assume that in the current year the Indian passenger car market will expand by 10 per cent – to a volume of almost 3.6 million units. This means that for the first time the India passenger car market will overtake the German car market in terms of volume. And the potential has not yet been exhausted – not by a long way,'' he said.

''The number of passenger cars here is still low by international comparison. Currently, India has 24 passenger cars for every 1,000 inhabitants, while Germany has 560 passenger cars for every 1,000 inhabitants'', he said.

The pavilion was supported through the official foreign trade show programme by the German Federal Ministry for Economic Affairs and Energy and AUMA, the Association of the German Trade Fair Industry. It is being realised by the trade show organizer IMAG.

''The population is young – more than half of all Indian citizens (54 per cent) are under 30, and only 6 per cent are over the age of 64. The per capita gross domestic product has also shown a positive trend during recent years, with annual increases of between 6 and 7 per cent.''

He, however, said too little attention is given to the fact that the Indian automotive industry has a surplus in passenger car trade with Germany. In the first 11 months of 2017, German companies sold cars worth €30 million to India while India supplied passenger cars worth €240 million to Germany, clearly demonstrating India's high level of competitiveness, he added.

''I am therefore keen to see the negotiations on a free-trade agreement between EU and India resumed soon. To date they have not come to fruition and are more or less on hold. From the outset, the VDA has worked for the complete removal of import duties in the automotive sector, even if this is associated with longer transition periods,'' Braunig said.

While India has not ruled out a free-trade agreement with EU, the restrictive trade practices followed by some European countries stand in the way of India opening its market to the EU.

Passenger car sales is just one component of bilateral trade. There are other more important items of export where Germany has a high trade surplus.