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India-EU FTA to Boost Auto Parts Exports, Enhance Global Supply Chain Role

The proposed India-EU Free Trade Agreement is expected to significantly improve access and price competitiveness for Indian auto component manufacturers in the European market. According to an ICRA report, tariff rationalisation will help Indian suppliers integrate deeper into global automotive supply chains and compete with nations that currently have preferential access. The changes will primarily impact the premium vehicle segment, while mass-market and EV tariffs remain largely insulated initially. Improved market access could also spur investment in advanced manufacturing and technology collaboration with European partners.

Key Points: India-EU FTA Benefits for Auto Component Makers

  • Tariff cuts to boost component exports
  • EU is major automotive production hub
  • Helps compete with other suppliers
  • Mainly affects premium vehicle segments
  • Encourages tech collaboration
2 min read

India-EU FTA to improve access, price competitiveness for Indian auto component makers

India-EU Free Trade Agreement to improve market access and price competitiveness for Indian auto component manufacturers in Europe, says ICRA report.

"tariff rationalisation and preferential access are expected to enhance pricing competitiveness and sourcing opportunities - ICRA Report"

Mumbai, Feb 6

Indian auto component manufacturers are likely to enjoy more access to European markets with improved price competitiveness under the proposed India-EU Free Trade Agreement, a report said on Friday.

The report from ICRA said that "tariff rationalisation and preferential access are expected to enhance pricing competitiveness and sourcing opportunities with European original equipment manufacturers (OEMs)".

The EU is a major automotive production hub and better trade terms could help Indian suppliers deepen participation in global supply chains, the report said.

It could help domestic component manufacturers compete more effectively with suppliers from countries that currently enjoy tariff advantages in the region, the ratings agency noted.

Automobiles and components currently make up about 3 per cent of India's exports to the EU, leaving room for expansion as barriers ease, the report said.

ICRA highlighted that the FTA includes a phased reduction in import duties on EU‑origin completely built units (CBUs), with tariffs falling from as high as around 110 per cent to roughly 10 per cent within specified price thresholds and quotas.

The change is expected to mainly affect premium vehicle segments while leaving mass‑market passenger vehicles largely insulated, the report said.

The report added that EV tariffs are likely to remain unchanged initially, giving domestic EV supply chains time to adjust to evolving trade dynamics.

Further, improved market access could encourage investments in precision engineering, electronics integration and specialised component manufacturing, and encourage technology collaboration and product diversification with European manufacturers.

"Export-focused mid-sized firms and MSMEs engaged in specialised components and aftermarket products could see improved access to European buyers as sourcing bases diversify and procurement strategies evolve within global automotive supply chains," the report noted.

Regarding imports to India, the report said the tariff cuts are likely to only benefit premium internal combustion engine (ICE) vehicles, with small or mid-segment cars remaining largely unaffected.

The EU is granting India preferential zero tariff access on 97 per cent of its tariff lines, covering 99.5 per cent of India's export value. India will eliminate or cut tariffs on 92 per cent of its tariff lines.

- IANS

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Reader Comments

P
Priya S
Finally, some positive movement on the FTA! Our component makers are world-class but often lose out on price due to tariffs. This levels the playing field against competitors from Southeast Asia. The focus on precision engineering is key for moving up the value chain.
R
Rohit P
Good step, but we must be cautious. The report says EU gets zero tariff on 97% of lines, we cut on 92%. Need to ensure our domestic market, especially for mass-market cars, is protected. Can't let it become a one-way street favoring only premium EU imports.
S
Sarah B
Interesting analysis. The phased reduction for CBUs from 110% to ~10% is dramatic. It will make luxury European cars much more affordable here, which is great for consumers. But as the report notes, it shouldn't hurt Maruti, Tata, Hyundai etc. in the volume segment.
V
Vikram M
The technology collaboration part is crucial. We have the manufacturing prowess, they have the advanced R&D. Partnerships in electronics and specialised components can make India a true global hub, not just a low-cost supplier. Jai Hind!
K
Karthik V
While the opportunities are clear, the implementation will be key. Our smaller firms need hand-holding to meet EU quality and compliance standards. Hope industry bodies like ACMA are ready with support programs. Otherwise, only the big players will benefit.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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