UK-India Trade Deal Falls Short of Carmakers' Hopes

Strategic Insights -

The UK-India trade deal has been met with disappointment from carmakers, who had hoped for more favorable terms. The agreement, signed yesterday, features a watered-down accord that will see tariffs for UK petrol and diesel car manufacturers remain at 75-125 per cent until 2031. High-end car manufacturers, such as Bentley and Jaguar Land Rover, will face import tariffs as high as 30 per cent in the early stages of the deal, while lower-end cars will face an even higher initial rate of 50 per cent.

Key Takeaways:

  • The UK-India trade deal was signed yesterday, but carmakers are underwhelmed by the terms, which were negotiated in "very difficult" last-minute talks between London and New Delhi.
  • Tariffs for UK petrol and diesel car manufacturers will not fall to the headline 10 per cent rate until 2031, and high-end car manufacturers will face import tariffs as high as 30 per cent in the early stages of the deal.
  • The quota system will allow for a maximum of 37,000 cars per year to be sold under the 10 per cent tariff rate, equivalent to about 4 per cent of UK-manufactured cars, in 2031.
  • Electric car quotas will increase over time, with higher-priced hybrids and EVs enjoying a fall in tariffs to 10 per cent by 2036.
  • Hybrid and electric cars priced at less than £40,000 will not enjoy a reduction in tariffs, as India looks to shield its domestic industry.
  • UK officials said domestic carmakers specifically wanted to target the higher end of the EV and hybrid market, and they believed the sector was broadly pleased.
  • The deal is expected to save carmakers £336m in tariff payments in 2031, rising to £1.7bn by 2041.

Sources:

  • Bloomberg - "UK-India car deal watered-down as tariffs stay high"
  • The Times - "India's tariff on British cars to remain at 75-125 per cent"
  • FT.com - "UK-India car deal in doubt over trade-off"