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2 months ago
India-EU trade deal: Tata Motors, M&M to Bharat Forge — why will auto stocks be in focus on Tues
Summary
Indian auto stocks such as Tata Motors, Mahindra & Mahindra (M&M), and Maruti Suzuki will be in focus in Tuesday's trading session (January 27) amid expectations of India-EU trade deal.
India plans to lower tariffs on cars imported from the European Union from 110% to 40%, as per a Reuters report published on Sunday, January 25, which is likely to bring Indian auto stocks into the limelight tomorrow.
According to experts, this represents the most significant opening of India's vast market as both sides move towards a possible free trade agreement that could be revealed as early as Tuesday.
“India's decision to cut import tariffs on EU cars is set to shake up the auto sector. European luxury brands like Volkswagen, Mercedes-Benz, and BMW are likely to benefit, selling cars at more competitive prices. Local dealerships and service providers will also see a boost. However, domestic players like Tata Motors and Mahindra & Mahindra may face increased competition in the luxury segment,” said Seema Srivastava, Senior Research Analyst at SMC Global Securities.
Further, Prime Minister Narendra Modi's administration has agreed to swiftly lower the tax on a selected range of cars from the 27-member bloc with an import price exceeding 15,000 euros ($17,739), Reuters reported, citing sources.
This will eventually be reduced to 10%, making it easier for European car manufacturers like Volkswagen, Mercedes-Benz, and BMW to enter the Indian market, as per the report.
Considering the scenario, Mohit Gulati, CIO and managing partner of the ITI Growth Opportunities Fund, mentioned that this will be sentimentally negative for listed auto players as this tips the scale in favour of VW, Mercedes, BMW and Audi.
According to Srivastava, the move is expected to make the Indian auto market more competitive, benefiting consumers. It also positions India as a competitive manufacturing hub, attracting investments and creating jobs. European luxury EV sales in India are likely to get a boost.
Srivastava indicates that the auto stocks expected to have a positive impact include Volkswagen India, Midas Components, and Bharat Forge. Conversely, there is almost no negative impact anticipated for Maruti Suzuki and Apollo Tyres. However, Tata Motors and Mahindra & Mahindra, particularly in the luxury segment, are likely to be negatively affected, she opined.
India ranks as the third largest car market globally in terms of sales, following the United States and China, yet its domestic automobile sector has been highly protected.
Reduced taxes will enable automakers to offer imported vehicles at lower prices and explore the market with a wider range of options before deciding to manufacture more cars locally.
Lower import duties will benefit European car manufacturers like Volkswagen, Renault, and Stellantis, as well as luxury brands such as Mercedes-Benz and BMW, which already produce cars in India but have faced challenges in expanding further, largely because of high tariffs.
New Delhi imposes tariffs of 70% and 110% on cars brought in from abroad, said Reuters.
For the initial five years, battery electric vehicles will be exempt from any reductions in import duties to safeguard investments made by local companies such as Mahindra & Mahindra and Tata Motors in this emerging sector. After these five years, electric vehicles will be eligible for similar duty reductions, said Reuters, citing sources.
Bhavik Joshi, Business Head, INVasset PMS, highlighted that at present, India imposes steep import duties on fully built passenger vehicles, often exceeding 60–100% depending on engine size and valuation.
According to Joshi, the proposed India–EU framework does not envisage a sudden dismantling of these barriers. Instead, tariff rationalisation is expected to be phased, likely differentiated by vehicle value bands, engine specifications, and potentially capped through annual quotas.
Luxury and premium vehicles are expected to see earlier relief, while mass-market segments are likely to remain insulated for longer, believes Bhavik Joshi.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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India plans to lower tariffs on cars imported from the European Union from 110% to 40%, as per a Reuters report published on Sunday, January 25, which is likely to bring Indian auto stocks into the limelight tomorrow.
According to experts, this represents the most significant opening of India's vast market as both sides move towards a possible free trade agreement that could be revealed as early as Tuesday.
“India's decision to cut import tariffs on EU cars is set to shake up the auto sector. European luxury brands like Volkswagen, Mercedes-Benz, and BMW are likely to benefit, selling cars at more competitive prices. Local dealerships and service providers will also see a boost. However, domestic players like Tata Motors and Mahindra & Mahindra may face increased competition in the luxury segment,” said Seema Srivastava, Senior Research Analyst at SMC Global Securities.
Further, Prime Minister Narendra Modi's administration has agreed to swiftly lower the tax on a selected range of cars from the 27-member bloc with an import price exceeding 15,000 euros ($17,739), Reuters reported, citing sources.
This will eventually be reduced to 10%, making it easier for European car manufacturers like Volkswagen, Mercedes-Benz, and BMW to enter the Indian market, as per the report.
Considering the scenario, Mohit Gulati, CIO and managing partner of the ITI Growth Opportunities Fund, mentioned that this will be sentimentally negative for listed auto players as this tips the scale in favour of VW, Mercedes, BMW and Audi.
According to Srivastava, the move is expected to make the Indian auto market more competitive, benefiting consumers. It also positions India as a competitive manufacturing hub, attracting investments and creating jobs. European luxury EV sales in India are likely to get a boost.
Srivastava indicates that the auto stocks expected to have a positive impact include Volkswagen India, Midas Components, and Bharat Forge. Conversely, there is almost no negative impact anticipated for Maruti Suzuki and Apollo Tyres. However, Tata Motors and Mahindra & Mahindra, particularly in the luxury segment, are likely to be negatively affected, she opined.
India ranks as the third largest car market globally in terms of sales, following the United States and China, yet its domestic automobile sector has been highly protected.
Reduced taxes will enable automakers to offer imported vehicles at lower prices and explore the market with a wider range of options before deciding to manufacture more cars locally.
Lower import duties will benefit European car manufacturers like Volkswagen, Renault, and Stellantis, as well as luxury brands such as Mercedes-Benz and BMW, which already produce cars in India but have faced challenges in expanding further, largely because of high tariffs.
New Delhi imposes tariffs of 70% and 110% on cars brought in from abroad, said Reuters.
For the initial five years, battery electric vehicles will be exempt from any reductions in import duties to safeguard investments made by local companies such as Mahindra & Mahindra and Tata Motors in this emerging sector. After these five years, electric vehicles will be eligible for similar duty reductions, said Reuters, citing sources.
Bhavik Joshi, Business Head, INVasset PMS, highlighted that at present, India imposes steep import duties on fully built passenger vehicles, often exceeding 60–100% depending on engine size and valuation.
According to Joshi, the proposed India–EU framework does not envisage a sudden dismantling of these barriers. Instead, tariff rationalisation is expected to be phased, likely differentiated by vehicle value bands, engine specifications, and potentially capped through annual quotas.
Luxury and premium vehicles are expected to see earlier relief, while mass-market segments are likely to remain insulated for longer, believes Bhavik Joshi.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
Download the Mint app and read premium stories
Log in to our website to save your bookmarks. It'll just take a moment.
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AI Description
The article discusses the potential impact of an India-EU trade deal on the Indian auto industry, focusing on changes in car import tariffs and their implications for both local and European manufacturers.