Hyundai joins chorus against duty sop to EU

Korean auto major Hyundai on Monday joined the chorus started by Toyota and other Japanese carmakers over a prospective duty cut on cars imported from Europe as part of the Indo-EU free trade agreement negotiations.

They are arguing that non-European companies have invested more in the country and should be allowed to operate in a level playing field.

Hyundai is India's second most popular carmaker, mostly selling small cars, but its recent success in the sedan segment with the Verna may be one of the reasons for its discomfort at the way the FTA negotiations have progressed.

European carmakers have been pressing hard for a reduction on the duty on cars with engines bigger than 1500cc from 60% to 30%, a move that may harm the prospects of the Verna.

'Till date we have invested almost ₹10,000 crore in India and the Japanese have invested even more,' said Arvind Saxena, director (marketing and sales), Hyundai Motor India Ltd (HMIL). 'To give a customs duty reduction to European carmakers (who have invested only a fraction of this) and not extend it to others would be highly unfair. What every company wants is a level playing field that encourages fair competition.'

The country's largest carmaker, Maruti Suzuki, has maintained a stoic silence on the issue, perhaps because it is not a serious player in the bigger car space, other Japanese companies like Toyota and Honda have already voiced concern.

Japanese carmakers led by Suzuki account for almost 52% of the domestic passenger vehicle market. That rises to almost 66% if Hyundai is also taken into account.

The Europeans on the other hand have been latecomers, with their biggest carmaker Volkswagen entering India only 4 years ago; they account for a mere 4% of the market.

If import of bigger cars from Europe is incentivised, cars like City, Civic, Corolla, Verna, Sonata, Santa Fe, Fortuner and Kizashi could be impacted.

Since its launch in May, Verna has got over 21,000 bookings and Hyundai has revised its annual sales target for the car from 40,000 to 50,000 units for 2011. That would be a 150% increase in sales over 2010, when it sold less than 20,000 units.