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Trade agreements

UK Automakers Face Quotas and High Tariffs in Post-Brexit India Deal

Strategic Insights

— 2 min read

Despite the hopes of many UK automakers to speedily enter the Indian market following the India-UK free trade agreement, the path to success is proving to be more challenging than expected. The deal offers reduced tariffs for luxury car imports but with strict quotas and tight limits on annual exports. Even Jaguar Land Rover, owned by the Tata group, is unlikely to benefit meaningfully in the near term as its bestselling Defender model is produced in Slovakia and thus ineligible for the reduced duties. UK manufacturers face a system with hefty taxes, a central government cess, and GST, making it difficult for them to compete with domestic players like Tata and Mahindra.

Key Takeaways:

  • The India-UK free trade agreement offers reduced tariffs for luxury car imports, but with strict quotas and tight limits on annual exports.
  • Jaguar Land Rover's bestselling Defender model, produced in Slovakia, is not eligible for the reduced duties under the India-UK trade deal.
  • UK manufacturers face a system with hefty taxes, a central government cess, and GST, making it difficult for them to compete with domestic players.
  • The small field of winners from the deal will be makers of electric and hybrid vehicles, with tariff reductions aligned with India's long-term clean energy transition goals.
  • Benefits for luxury electric and hybrid vehicle models are tightly limited, with only top-of-the-market brands like Bentley and JLR eligible for reduced tariffs.
  • The Indian government's strategy is to protect and grow its domestic electric vehicle market, focusing on affordability.
  • Despite the constraints, the agreement may benefit British EV makers in the long term, particularly those focused on the luxury electric or hybrid niche.
  • Changes to India's regulatory landscape or political shifts in London or Delhi could limit market access or even prompt a renegotiation of the terms.

Statistics:

  • Reduced tariffs on luxury car imports to 15% by 2031, down from the initial 30-50% tariff.
  • Quota for UK manufacturers to export 4% of their total annual petrol and diesel vehicle production to India at the reduced tariff rate.
  • Only top-of-the-market brands like Bentley and JLR are eligible for reduced tariffs on luxury electric and hybrid vehicle models, priced above £40,000.
  • No benefits for lower-end electric vehicle models under the India-UK trade deal.

Sources:

  • David Bailey, Automobile industry expert and professor of Business Economics at Birmingham Business School.
  • Jaguar Land Rover, owned by the Tata group.
  • Tata Motors.
  • Mahindra & Mahindra.
  • JSW.
  • SAIC, Chinese carmaker.
  • Geely, Chinese EV manufacturer.
  • ABP Private Limited, distributed by Contify.com.

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