Facing a flat market in Europe, falling sales in China and a fragile situation in the US, UK car makers are looking hungrily at a huge market that is predicted by some to be on the cusp of explosive growth.
India has always been a tough prospect, particularly for premium makers, because of extremely high tariff barriers for those wanting to export cars there. But an agreement reached between the UK government and India to reduce tariffs on ‘high-end’ cars from 100% to 10% suddenly brings the world’s most populous market into play.
“There's a lot of wealth there, but the premium and luxury car market has been very suppressed,” Adrian Hallmark, CEO of Aston Martin, told the SMMT Summit in June. “A [tariff] reduction of that size for UK-based manufacturers is really quite significant. It would put all the luxury British brands in a position where we’re in almost the same price category as high-spec premium cars.”
Last year India imported cars worth the equivalent of £55 million from the UK, with Indian-owned JLR accounting for the bulk of that. It sounds a lot but India didn’t even make the top 10 of countries the UK exported cars to last year. In fact, it accounted for less than 1% of the total.
The trade deal, once signed, will improve that. The final deal will be subject to a quota, with a similar arrangement for cars exported from India to the UK. Exports will include the upcoming Suzuki e-Vitara and related Toyota Urban Cruiser small electric SUV.
On paper, India is an extremely promising market. The country has the highest growth rate in the G20 countries and it is expected to remain above 6% over at least the next five years, according to UK government forecasts.
The country recently became the fifth largest economy in the world, overtaking the UK, and is expected to grow to the third largest by 2028.
Meanwhile, India-based Tata Motors forecasts that passenger car sales will rise to six million by 2030, up from 4.3 million in the last financial year ending March.
The country still has an incredibly low number of cars per capita at just 32 for every 1000 people in the country, according to Tata figures, compared with around 300 for China.
Tata is sure where the growth will come from. “The key driver will be, of course, the high-consumption households,” Shailesh Chandra, managing director of Tata Motors passenger vehicles, told analysts at the company’s investor day in June. “You're going to see rich and super-rich – people who really buy the cars – grow two to three times in the next five to six years.”
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