Auto component makers cry foul over import duty cut

Even as domestic autocomponent manufacturers have lobbied with the commerce ministry to reverse last week's customs duty cut on auto components, car companies, especially those with upmarket models, may scrap plans to raise prices or cut prices.

Officials in Ford, Honda, General Motors and Toyota confirm that they are studying the impact of the duty cuts and may lower prices for selected models, though they may simply absorb raw material price increases in others. All the companies have models with a high import content.

Customs duty was cut from 12.5 per cent to 7.5 per cent on 62 critical automotive components as part of an overall inflation-control package. The main components on which duty has been cut are spark plugs, ignition systems, crank shafts, power transmission and turbochargers.
 

FOREIGN TOUCH
Company	Model	Imported content(%)
Honda	Accord	65
Honda	Civic	40
DiamlerChrysler	E Class	60
DiamlerChrysler	C Class	70
BMW	3-Series	80
BMW	5-Series	85
Ford	Endeavour	50
Ford	Fiesta	20
Toyota	Camry	50
General Motor	Aveo U-VA	40
General Motor	SRV	45
Hyundai	Sonata	45
Hyundai	Elantra	40
Fiat	Petra	45
Skoda	Laura	70

 
Meanwhile, the Autocomponents Manufacturers' Association of India (ACMA) has approached commerce minister Kamal Nath to reverse the duty cuts in the interests of the domestic manufacturers.

"The government has taken a unilateral decision. When compared with other nations and the Asean countries, it will affect our competitiveness and reduce our market, " said a senior ACMA member.

Affirming that the domestic components industry would be hit by the duty cuts, Scott McCormack, vice-president (sales and marketing), Ford India, said, "Imported components account for a significant part of the cost of the car. These are not always available in the domestic market, so duty cuts will help us absorb input costs."

He added that some products such as Endeavour, which has 50 per cent import content, will benefit from the lower duty structure, so prices might be reduced here. However, for Fiesta the duty cut will help Ford absorb an increase in raw material costs and might not be a candidate for a price cut. Ford India imported about 21,000 diesel engines till December 2006 for its Fiesta model from its subsidiary in France.

Adds General Motors India vice-president P Balendran says: "We have been importing engines and critical parts from our Korean subsidiary, we will study the entire impact on our operations."

A senior Toyota executive said that the foreign component in Camry is over 50 per cent and the company would be studying the impact of the customs cut before taking any decision.

India faces a deficit in the automobile component market with imports being worth Rs 8,700 crore and export standing at Rs 8,100 crore for the 2005-06 fiscal.