ASEAN and the Indian Auto Industry

The Framework Agreement on Comprehensive Economic Cooperation between India and ASEAN (Indo-ASEAN CECA), was signed on 8th October 2003 and it inter alia envisages a Free Trade Area (FTA) in goods between India and ASEAN. The Government of India and ASEAN have agreed to conclude negotiations by June, 2006 with a view to commence implementation of the FTA by January, 2006. The Indo-ASEAN CECA also envisages Free Trade Areas in Services and Investment.

So what does this mean for the Auto Industry??

Well as capacity utilisation in the western automotive world say Germany/ Italy is being optimised, to meet the demand of the ever growing industry big names like Bavarian Motor Works and Peoples Car ( VW) is looking at so called low cost countries such as us.

So India - ASEAN are fighting for the same investment space in the auto world.

Now if you were BMW, and you knew India is an awesome market and ASEAN was a great manufacturing hub, where would you have invested???

tough question but if you could import into India from ASEAN at Zero duty then??? Bingo

Well the Indian Auto Industry is competitive enough within the four walls of the factory , but the momnent the India foot printsof high electricity cost or embedded taxes etc come in we become less competeive than Thailand..

Again the industry is a highly tierised industry, OEM , Tier I , TierII and then downwards..
so the moment the balance in one tier is gone the whole industry will suffer.

If tomorrow a car comes duty free..is it only the car manufacturers who get hit.. no

if car is imported so will the engines..
engine makers like say cummins... then all people manufacturing so called HS 840991/9 items or engine parts..
this has a whole lot of items like pistons and rings, alternators, transmission .. etc etc
hence the whole industry is hit.

Every FTA has a negative list where duties are not reduced, so why not keep it in the the negative list.

Well ASEAN doesnt want one..and Indian head of Government has promised that this time if there is a negative list it wont be more than say 500 items..out of say 5600 tariff lines.

Where as with Indo -Thai FTA or BIMSTEC it was 1158 items.

Out ofthe 500 , 300 items will be agriculture, then cotton.. and then if some thing is left for the Auto industry .
I am not questioning the rationale of an FTA but the timing of an FTA,
Investments might just joke, a projected 400 Bn dollar component industry might be nipped at the bud..

so what is to be done...

Wait and watch???