New Delhi, Jan 28 (PTI) India has fully protected its mass market cars in the trade pact with the EU and has extended import duty concessions only in a calibrated and phased manner for passenger vehicles priced above Rs 25 lakh, subject to an annual quota of 2.5 lakh units, an official said on Wednesday.

In addition, the quota will largely be extended to traditional automobile manufacturers from the European Union (EU), the official said.

India and the EU on Tuesday announced the conclusion of negotiations for the agreement. It is expected to be signed and implemented this year only.

As per the agreement, India has granted a total annual quota of 1.6 lakh diesel and petrol vehicles, and 90,000 for electric vehicles (EVs).

India has not extended any duty concessions on cars priced below 15,000 euros (CIF - cost, insurance, freight) value, which translates to a retail price of about Rs 25-27 lakh after adding components such as customs duty, GST and other levies like road tax, etc.

About 90 per cent of India's mass market in the domestic passenger car segment comes in the sub-Rs 25 lakh price category. The country's passenger vehicle market, now the third largest in the world, stands at over 43 lakh units annually.

"India is granting quota mostly on large-size ICE (internal combustion engines) vehicles, and high price range EVs while simultaneously protecting sensitive segments of India's automotive industry (small size engine capacity ICE vehicles and mid-low price range EVs)," the official said.

Under the FTA, the quota is divided into three price bands for diesel and petrol cars.

Cars priced below 15,000 euros will not receive any duty concessions.

For cars priced between 15,000 euros and 35,000 euros, import duty will be reduced to 35 per cent in the first year of the pact's implementation, with a quota of 34,000 units. In this band, India's market is about 2.5-3 lakh units at present.

For cars priced between 35,000 euros and 50,000 euros, and those priced above 50,000 euros, the duty will be reduced to 30 per cent in the first year, with a quota of 33,000 units each.

The total quota in the first year will be 100,000 units.

The 30–35 per cent duty range will be gradually reduced to 10 per cent for vehicles of all the above price bands from the current 110 per cent by the fifth year, while the quota will be increased to 160,000 units.

Duty for CKDs (completely knocked down) units for 75,000 ICE vehicles will be reduced from 16.5 per cent to 8.25 per cent, a move that is expected to bring down the prices of luxury cars assembled in India by makers such as Mercedes-Benz, BMW and Audi.

Similarly, for EVs, there will be no concession on cars priced up to 20,000 euros.

The 90,000 quota is distributed in three price bands: 20,000 euros to 40,000 euros; 40,000 euros to 60,000 euros; and above 60,000 euros.

The duty concession on EVS will start in the fifth year of the implementation of the pact.

The duty cuts and quota will help the EU makers launch new models and gradually start manufacturing in the country, the official said, adding that India's quota starts with one lakh, then it goes to 2 lakh units in the 10th year and then 2.5 lakh in the 14th year.

The quota for CKD also starts from 75,000 and till fifth year, and it will be reduced to 50,000 in the 10th year. At any time, India's quota will not cross 3 lakh. There is no duty cut on Semi-Knocked Down (SKD) units.

"And we expect the numbers to be less than 2.5 per cent of our markets," the official added.

For Indian carmakers, the EU will provide a quota that is 2.5 times higher than what India will offer to European manufacturers under the agreement. The EU has agreed to give complete liberalisation in CKDs and all vehicles above 50,000 euros.

Below 50,000 euros, the quota for India is 6.25 lakh vehicles.

"We want to capture the market and bring in supply chains. Auto part concession goes down to zero in the 10th year, so that we can bring in supply chains here and do value addition," the official said.

The EU will offer complete liberalisation for the Indian auto sector for ICE, hybrids and battery electric vehicles.

The official added that easing norms for CKD imports will encourage the EU's OEMs (original equipment manufacturers) to set up local assembly lines.

This serves as a stepping stone, moving foreign OEMs from importing to assembling, eventually to full localisation as they build local supply chains.

This brings high-end manufacturing processes, quality standards and advanced R&D practices into the Indian ecosystem, the official said. PTI RR MSS RKL HVA