Mumbai, Feb 6 (NationPress) Indian auto component producers are poised to gain greater access to European markets, along with enhanced price competitiveness, thanks to the proposed India-EU Free Trade Agreement (FTA), according to a report released on Friday.

The analysis from ICRA indicates that "tariff rationalization and preferential access are anticipated to boost pricing competitiveness and sourcing opportunities with European original equipment manufacturers (OEMs)."

As the EU stands as a significant automotive production center, improved trade conditions may allow Indian suppliers to strengthen their roles in global supply chains, the report outlined.

This shift could enable local component manufacturers to compete more robustly against suppliers from nations that currently benefit from tariff advantages in the region, the ratings agency observed.

Currently, automobiles and components represent approximately 3% of India’s exports to the EU, indicating potential for growth as trade barriers diminish, the report highlighted.

ICRA pointed out that the FTA entails a gradual reduction in import duties on EU-origin completely built units (CBUs), with tariffs decreasing from around 110% to nearly 10% within designated price thresholds and quotas.

This alteration is expected to primarily impact premium vehicle segments while keeping mass-market passenger vehicles relatively insulated, according to the report.

Furthermore, it mentioned that EV tariffs are likely to remain stable initially, allowing domestic EV supply chains to adapt to changing trade dynamics.

Enhanced market access might also spur investments in precision engineering, electronics integration, and specialized component manufacturing, fostering technology collaborations and product diversification with European manufacturers.

The report noted that "export-oriented mid-sized firms and MSMEs involved in specialized components and aftermarket products could experience better access to European customers as sourcing bases diversify and procurement strategies evolve within global automotive supply chains."

In terms of imports to India, the report stated that tariff reductions are expected to benefit primarily premium internal combustion engine (ICE) vehicles, with smaller or mid-segment cars remaining largely unaffected.

The EU is set to offer India preferential zero-tariff access across 97% of its tariff lines, encompassing 99.5% of India’s export value. India will lower or eliminate tariffs on 92% of its tariff lines.