‘Britain, India have potential to expand auto trade post-Brexit’

Britain and India have the potential to expand post-Brexit trade in the auto sector, the head of the body representing British manufacturers said, as exports of UK-made cars to India rose 8.3 per cent in the first half of the year, while those of Indian-made cars to the UK nearly doubled.

The 8.3 per cent rise in sales of UK cars was driven by increased demand for British-made luxury cars in India.

Mike Hawes, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT), said there are many opportunities for growth in areas such as in the development of autonomous, connected vehicles, as well as in the Indian after-market segment.

“The UK currently has a negligible part of that market in India but we have a lot of expertise and there are a lot of products that could be developed,” he said in an interview with BusinessLine in London. “We want to develop those relations but obviously it has to be mutual.”

However, he added that raising sales of British-made luxury cars — for which there is greatest demand in India —remained limited with high tariff regimes still in place. He also expressed his reservations about the potential for changing this in the wake of a free trade agreement between the two countries. “One would hope so but history would suggest it’s going to be incredibly difficult,” he said.

His comments came as the SMMT said UK car production fell 2.9 per cent in the first half of 2017, as demand in Britain declined, which it attributed to the current uncertainty around the Brexit negotiations. The industry is also dropping its ambition of producing 2 million cars a year by 2020.

“The UK automotive industry is in particularly challenging times in terms of production, new cars sales and level of investment,” said Hawes. Investment in the first six months of 2017 stood at around £350 million, compared to £2.5 billion annually between 2012 and 2015 and £1.66 billion in 2016.

“In pure figures the level of investment committed has declined — if you match that with anecdotal evidence we find they say we are ‘waiting to see’, they are looking for more clarity on what the future relationship is going to be in our future markets. Clarity is needed as soon as possible,” he said.

“The investments you make now you realise in terms of production in around four years, so for the time being we are ok but once you get to 2020, 2021 it’s greyer.” The SMMT has been pushing for interim arrangements that maintain access to the single market and customs union to avoid a cliff edge situation. ‘We are totally integrated with the European automotive industry — the future relationship we have is fundamental to our continued success. We need to maintain the barrier free trade that we currently enjoy,” he said, adding that reverting to WTO terms, which would result in a 10 per cent tariff on vehicles and a 4.5 per cent tariff on parts, will be disruptive to the supply chain.

He added that access to global talent — from Europe and beyond — would be crucial. Currently one in 10 workers in the UK car industry is a non-UK national.

“There are 5,000 vacancies we can’t fill…we need to be able to bring in talent often at short notice, not necessarily just for highly skilled workers but semi skilled workers too.”

Of the government plans to ban the sales of new conventional diesel and petrol vehicles by 2040, Hawes said it is a “heavy handed measure” and that the government needs to ensure the right policies are in place to facilitate a shift to greener alternatives. This can be done by providing infrastructure, a tax system that encourages investment, and incentives for consumers to switch. On this too clarity is needed, and soon, he added.

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