Exclusive: Indian automakers offer import duty reduction as part of trade deal with Britain

  • Automakers propose 30% tax cuts over a decade – sources
  • India has some of the highest import taxes of 60% to 100% on cars
  • Government wants companies to lower barriers to entry – sources
  • Companies fear it will set a precedent for talks with European sources

NEW DELHI, Oct 7 (Reuters) – Indian carmakers have offered to cut the tax rate on imported cars to 30% as part of a trade deal with Britain, sources told Reuters, an unprecedented decision that could facilitate access to one of the largest markets in the world. protected automotive markets.

It is the first time that Indian automakers have backed such cuts, bowing to pressure from a government to back down from their protectionist stance and lower barriers to entry, sources with knowledge said. directly from the file.

Import taxes of 60% to 100% in the world’s fourth-largest auto market rank among the highest in the world, drawing criticism from companies such as Tesla Inc (TSLA.O) which have put plans on hold. entrance due to high tariffs.

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The Society of Indian Automobile Manufacturers (SIAM) lobby group has written to the government backing phased cuts to 30% over five years, after a five-year grace period with none, three sources said, speaking as covered with anonymity.

It was not immediately clear whether India had presented the offer to Britain in trade talks which were due to conclude soon, with the signing of a final deal expected by the end of the month.

SIAM, which includes automakers from India’s best-selling Maruti Suzuki (MRTI.NS), to big companies such as Tata Motors (TAMO.NS) and Mahindra & Mahindra, did not immediately respond to a request for comment.

The Commerce Ministry, which is leading the trade talks, also did not respond.

For years, Indian automakers have resisted tax cuts to protect their turf, while arguing that such a move would dry up investment in domestic manufacturing by making imports cheaper and easier for global automakers. .

With few car factories in Britain run by Nissan (7201.T), BMW (BMWG.DE) and Tata’s Jaguar Land Rover, companies fear the move could set a precedent for deal-making with others like the European Union (EU). , Japan or South Korea, the sources said.

The shift in stance comes weeks after Trade Minister Piyush Goyal strongly told senior executives of companies including Maruti Suzuki, Tata Motors and Mahindra that India must make some sort of offer to Britain. Britain on automobiles.

“Goyal’s message was clear – if companies don’t come up with a tax cut proposal, the government will do it for them,” said a person who attended an August meeting between the minister and business leaders. company.

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

However, the plan to lower tax rates to 30% over 10 years “is not enough”, believes a government source, while conceding that not lowering tax rates this time was “not an option”.

One of the sources said: “One point of view is to make it easier to access luxury cars earlier than other categories. The industry has no problem opening it up and lowering prices earlier. “

India’s push comes in a bid to boost trade relations globally, which has seen recently signed agreements with Australia and the United Arab Emirates, to attract investment from companies looking to expand. diversify beyond China.

The high tax on imported cars was one of the deal breakers in previous EU trade talks that ended in 2013.

India has resumed talks with the region, home to companies such as Volkswagen AG (VOWG_p.DE) and Mercedes-Benz which see India as a major growth market, and hopes to finalize a deal by the end of 2023.

Some companies are also concerned that with large investments in clean mobility, the easy import of electric vehicles could hurt local players, they added.

“Everyone is acting with a lot of trepidation and little data on the impact a reduction in duties can have,” one of the sources said.

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Reporting by Aditi Shah and Aftab Ahmed in New Delhi; Additional reporting by Aditya Kalra; Editing by Clarence Fernandez

Our standards: The Thomson Reuters Trust Principles.

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