[dragracer567]

This is quite a surprise development. As part of the India-UK Free Trade Agreement (FTA) scheduled to be signed around Diwali, Indian car manufacturers have themselves taken the initiative to propose a cut in the import tax of British-made cars to 30%. At present, the import tax is between 60% and 100% depending on various factors like the engine size. It's strange because Indian car manufacturers have generally been quite protectionist and is apparently due to government pressure. I'm guessing the recent success of Tata and Mahindra models has given Indian companies the confidence to handle more competition while there is also the fact that most British-made cars aren't exactly commuter cars anyway. Cheaper Jaguars and Land Rovers are already assembled locally, so this only impacts vehicles like full-size Range Rovers, Bentleys, Aston Martins etc - the kind of cars that don't compete with Indian-manufactured cars. It remains to be seen if this will actually make it as part of the agreement and if it does, the India - European Union FTA scheduled to be signed in 2023/2024 might carry this provision as well (we might see the Polo again, who knows!).

Source: Reuters

NEW DELHI, Oct 7 (Reuters) - Indian car makers have proposed cutting to 30% the tax rate on imported cars as part of a trade deal with Britain, sources told Reuters, an unprecedented move that could ease access to one of the world's most protected automobile markets.

It is the first time Indian car makers have backed such cuts, caving to pressure from a government that wants them to give up their protectionist position and lower entry barriers, sources with direct knowledge of the matter said.

The shift in stance comes weeks after commerce minister Piyush Goyal firmly told senior executives of companies such as Maruti Suzuki, Tata Motors and Mahindra that India needed to make some kind of offer to Britain on autos.

"The message from Goyal was clear - if companies don't come up with a proposal on lowering taxes, the government will do it for them," said one person who attended an August meeting between the minister and company executives.

Maruti, Tata and Mahindra did not immediately respond to a request for comment.

However, the plan to cut tax rates to 30% over 10 years "is not enough", said a government source, while conceding that not reducing tax rates this time was "not an option".

One of the sources said, "One view is to ease access for luxury cars sooner than other categories. The industry has no issues opening it up and lowering rates earlier."

India's push comes in an effort to boost trade ties globally, that saw deals recently signed with Australia and the United Arab Emirates, so as to attract investment from companies seeking to diversify beyond China.

[GTO]

A convenient move & a "lipstick" manouveur. Britain's manufacturing industry is dead. No one will benefit from this. At best, Jaguar-Land Rover for 100 units / year, but even they have CKD for some of their popular models.

It's like selling refrigerators to Eskimos.

I am a firm believer of very high import taxes as "if you want to sell it here, build it here" .

[itwasntme]

Wholly agree. Build it here in India; make a long term strategic investment.

Pitiful list compared to heydays, but maybe we'll get the Honda Civic (back again, albeit at ~60L!) or the Infiniti Q30 or the Lotuses or the Astra or even the Ariel Atom !

https://www.theaa.com/car-buying/cars-made-in-britain

[dragracer567]

Originally Posted by GTO

A convenient move & a "lipstick" manouveur. Britain's manufacturing industry is dead. No one will benefit from this. At best, Jaguar-Land Rover for 100 units / year, but even they have CKD for some of their popular models.

It's like selling refrigerators to Eskimos.

I am a firm believer of very high import taxes as "if you want to sell it here, build it here" .

There is also the wider context. India needs these FTAs to supercharge its exports and try to attract companies that are fleeing China. Especially in the UK context, this is a very insignificant concession as you’ve rightly pointed out for the kind of investments (+ visas) that could enter India. It could be an issue if such a concession is sought by countries that make cheaper cars like Japan, South Korea, Thailand or China.

[shankar.balan]

Originally Posted by GTO

A convenient move & a "lipstick" manouveur. Britain's manufacturing industry is dead. No one will benefit from this. At best, Jaguar-Land Rover for 100 units / year, but even they have CKD for some of their popular models.

It's like selling refrigerators to Eskimos.

I am a firm believer of very high import taxes as "if you want to sell it here, build it here" .

Oh yeah brother. Lipstick. And it’s wearing thin too!
Im with you on this insofar as make in India. But Govt also has to allocate premises and so on in a nice manner so that the workers who staff it up dont have to rough it to get to work.

[ChiragM]

Originally Posted by itwasntme

Pitiful list compared to heydays, but maybe we'll get the Honda Civic (back again, albeit at ~60L!) or the Infiniti Q30 or the Lotuses or the Astra or even the Ariel Atom !

This Wikipedia page doesn't seem to be updated. Sorry to disappoint you but the Civic and CR-V are no longer made in Swindon. The Honda Swindon plant closed in 2021. In fact, I read that Honda no longer manufactures cars in Europe

https://www.bbc.com/news/uk-england-wiltshire-57987601

OT: I visited the Swindon plant during my Masters course in 2017. There was a nice Type R to welcome us at the reception.

[sandeepmdas]

This is a surprise development indeed, but please note that the proposed tax reduction is in the form of import (customs) duty. The state governments can increase road tax of UK-made cars specifically.

The central government too could add additional tax layers once the consignment is cleared out of customs but I doubt they would do it. AFAIK the FTA are mostly a reduction of import duty and/or import restrictions. The moment the GoI reduce the import duty the word given to the UK administration stands honored. State governments are India's internal matter and the UK is unlikely to complain if some states create additional taxes, but they will most certainly do if the central government does so.

[StarrySky]

I'm not sure what is the import tax in the UK for vehicle imports from India, but I guess there will be some reciprocal tax cuts by the UK in the agreement as well. If that is the case, is this more about making Indian exports to UK cheaper? The home-grown players (Tata, Mahindra) may be interested in exporting EVs, while Maruti would also appreciate import tax cuts in the UK.

[V.Narayan]

Well said @StarrySky. +1 . This is about Indian cars to the UK than the other way around. Though some imports too will happen.

All,

A trade agreement between two major economies cannot be examined item by item because all the concessions India grants to the UK and all the concessions UK grants to India have to be viewed in their entirety and not piecemeal. We might have granted them a concessional import duty on cars made in the UK in return for them granting us concessions on {just an example} on the almost $1.0 bn iron & steel we export to the UK which in turn is given in return for XYZ concession from UK to us on PQR and so on it goes. This has nothing to do with cars per se but is a part of a much wider agreement covering about 90 to 100 odd industry/product groupings, visa rights, immigration status, investment rights both ways, transfer of technology policies and with UK, defence procurement too.

All in all I think it is a good thing to bolster our trade with the UK. They need countries like us right now. And now both sides can talk as equals which makes for a healthy trade arrangement. While we are celebrating rightfully our new position as the 5th largest economy {in nominal GDP} fact is UK & France will trade position numbers 6 & 7 between them for years if not decades. So it makes sense to have a special trade deal with the UK {and Japan}, easier to negotiate than with the EU. UK & Japan are the two big economies outside USA, China and EU with whom we can have a more balanced discussion and trade offs. God only knows Liz Truss needs a good news trade deal right now. The fly in the ointment is her Home Minister Suvella Braverman. All in all a right step at the right time.

Interestingly main Indian exports to the UK are heavy machinery, heavy electricals, iron & steel, textiles & garments, gems & jewelry, electronic equipment, pharmaceuticals with total exports at $11.0 bn. Which is quite small compared to total Indian exports of ~$660bn ie less than 2%. UK exports to India are only ~$600 million. So a lot of scope to improve.

In my main career, now ended, I have set up and run industrial units in UK, France, Ireland, Slovak Republic, Hungary. Ireland was a darling of a place to do business in - the best white country for brownies to do business in, in my opinion. UK came next. Hungary was a mixed bag - they wanted the jobs but hated working for brownies like me. France was a challenge - EU bureaucracy and its million rules married to third world side bar deals, conversations and winking. Slovak republic brings in the tail end here with attitudes to business, trade and industry that makes us look good. These are only my observations over many years, others might have different views.

The British, as Napoleon said, are a nation of shopkeepers {much like us!!} and doing a trade deal when they need it makes sound economics and politics.

Originally Posted by StarrySky

I'm not sure what is the import tax in the UK for vehicle imports from India, but I guess there will be some reciprocal tax cuts by the UK in the agreement as well. If that is the case, is this more about making Indian exports to UK cheaper? The home-grown players (Tata, Mahindra) may be interested in exporting EVs, while Maruti would also appreciate import tax cuts in the UK.

[dragracer567]

Originally Posted by V.Narayan

Interestingly main Indian exports to the UK are heavy machinery, heavy electricals, iron & steel, textiles & garments, gems & jewelry, electronic equipment, pharmaceuticals with total exports at $11.0 bn. Which is quite small compared to total Indian exports of ~$660bn ie less than 2%. UK exports to India are only ~$600 million. So a lot of scope to improve.

Top gear fans would remember that this was the premise behind the ill fated Top Gear India special. We buy less from the British than from the Belgians or the Swiss!

[srh]

I guess when they say 'Indian manufacturers' they mean Tata Motors. We know which side of the bread is buttered for Tata Motors. Inconsequential to say the least. Knowing our babus, they may reduce customs and add to the GST/ registration for certain classes of cars which are likely to get imported through such FTAs.

[greenhorn]

Originally Posted by ChiragM

This Wikipedia page doesn't seem to be updated. Sorry to disappoint you but the Civic and CR-V are no longer made in Swindon. The Honda Swindon plant closed in 2021. In fact, I read that Honda no longer manufactures cars in Europe

https://www.bbc.com/news/uk-england-wiltshire-57987601

OT: I visited the Swindon plant during my Masters course in 2017. There was a nice Type R to welcome us at the reception.

The first thought i had on reading the headline was that i could get a cheap civic type r or something fun. So much for that dream

[dragracer567]

Originally Posted by greenhorn

The first thought i had on reading the headline was that i could get a cheap civic type r or something fun. So much for that dream

The only relatively inexpensive car that might benefit is the Mini Cooper (since the countryman is assembled locally). But even then, states can hike the registration fees as many others pointed out. I’m guessing Brits are hoping that Indians get rich enough by 2030-35 to buy Range Rovers in bulk like the Chinese do. It’s all about the long game!

[aim120]

Originally Posted by StarrySky

I'm not sure what is the import tax in the UK for vehicle imports from India, but I guess there will be some reciprocal tax cuts by the UK in the agreement as well. If that is the case, is this more about making Indian exports to UK cheaper? The home-grown players (Tata, Mahindra) may be interested in exporting EVs, while Maruti would also appreciate import tax cuts in the UK.

Also considering India makes lot of RHD cars which are cheaper compared to RHD cars made in Japan.

Tata, Mahindra want a pie in EV segment. In UK the cheapest EV is a Citroen Ari which costs 7.6k £ and the next cheapest EV is Smart EQ which costs 22k £. So Tata current EVs have a lot of potential in UK.

Maruti also can export the 5 door Jimny.

[anjan_c2007]

The UK is ushering in a new FTA with India, post Brexit. The erstwhile EU clouds hovering over UK have disappeared.

The FTA list could be huge. They at present do not have any major electronic brand surviving. Many older, iconic British consumer brands have perished. Gillette and 7o Clock among quite a few survive.

The 30% duty cuts on British imports will be visible only for niche cars as they do not have any mass market car brand surviving other than Vauxhall and Ford. Morgan, JLR brands Land Rover, Jaguar (though an executive car brand in the UK its niche here), Aston Martin, Mini, Rolls Royce, Bentley are among the UK located niche brands.

Fords could reenter via the import route. The Vauxhall brand could also return back to India after nearly 70 years.

The Japanese and South Korean car makers have their manufacturing and assembly plants in the UK. Since they are very well established here in India, it hardly makes sense to ship their mass market cars to India. Some high end cars from their plants could however land in India.

The Indian automobile buyers would have truly had a jolly good time had brands like Morris, MG (original and not the Chinese clones), Triumph, Hillman, Sunbeam, Humber, Rover, Riley, Wolseley, Pierce Arrow and many more, survived.