How trade deal with UK will impact automakers in India
What's the story
The Free Trade Agreement (FTA) signed between India and the UK is creating a wave of optimism in the auto sector here.
Industry giants including Tata Motors, Eicher Motors, and TVS Motor Company are seeing increased buying interest on the stock market.
The FTA is expected to have a major impact on premium vehicle imports, with Indian tariffs on automotive imports from the UK falling from over 100% to 10%.
Market response
Tata Motors is poised for gains
Tata Motors is leading the charge in this positive market response, followed by Bharat Forge, Ashok Leyland, TVS Motor Company, and MRF.
Almost 10 out of the 15 constituents of the Nifty Auto index are trading in green today.
This surge is primarily due to the impact of reduced tariffs on premium UK vehicles under the new trade agreement.
Impact
FTA to boost sales of Jaguar Land Rover
Both the UK and Indian governments have agreed to introduce quotas for auto imports under the FTA.
This move is expected to make premium UK cars more accessible to Indian consumers.
Tata Motors, in particular, stands to benefit significantly from this agreement as it could boost sales of its luxury brand Jaguar Land Rover (JLR) in India.
Other beneficiaries
Eicher Motors and TVS Motor Company to benefit
Eicher Motors, famous for its Royal Enfield bikes, is also expected to benefit from the FTA, given its strong UK presence.
This could potentially translate into margin improvement and volume growth for the company.
Sudarshan Venu, Managing Director of TVS Motor Company, was also optimistic about the agreement's potential impact on their British brand 'Norton.'
Trade goals
FTA aims to raise bilateral trade significantly by 2030
The FTA, India's first major trade pact with the UK, seeks to increase bilateral trade to $120 billion by 2030.
The target is a major jump from the current numbers, with bilateral trade increasing from $20.36 billion in FY23 to $21.34 billion in FY24.
The deal is likely to cause a steep increase in Indian exports to the UK by 2027, especially in apparel, auto components, and chemicals.