Jaguar Land Rover and Diageo Among Key Beneficiaries in UK-India Trade Deal

India's decision to reduce tariffs on UK-made cars and whiskey as part of a sweeping trade agreement could benefit a number of companies, including Jaguar Land Rover and Diageo Plc.

The Free Trade Agreement, announced on Tuesday after three years of negotiations, will make it cheaper for UK businesses to sell whiskey, cars, auto parts, cosmetics, biscuits, clothing, and electrical machinery in the world's most populous country. Indian exporters to the UK will benefit from lower tariffs on 99 percent of their products and services.

The agreement saw India open up some of its most protected sectors, such as automobiles, and sets a precedent for other trade agreements currently being negotiated, including with the European Union and the United States.

Such bilateral agreements also provide a cushion against the tariffs imposed by US President Donald Trump.

Radhika Rao, an economist at DBS Bank Ltd., wrote in a May 7 note that the trade agreement could take effect after a year. Bilateral trade is expected to nearly double in a few years, from $21 billion in the fiscal year ended March 2024, she wrote.

Automobiles

While the reduced tariffs — from 110% to 10% — will begin with fossil fuel-powered cars, they will be gradually extended to electric and hybrid vehicles over a 10-year period, according to information on the UK government website.

The UK will also allow Indian automakers to export these technologies to that country, with similar terms.

Beneficiaries may include Jaguar Land Rover and other luxury brands with UK factories, such as Bentley, Aston Martin, Vauxhall, and Mini.

Domestic automakers such as Mahindra & Mahindra Ltd. and Maruti Suzuki India Ltd., which have invested in EVs, may feel the pinch. It is unclear how these concessions will be structured, as well as what price threshold will apply to a quota of vehicles that can be imported at lower tariffs.

While this is the first time India has taken steps to liberalize its nascent EV market, it has refrained from offering UK automakers an immediate low-cost entry, giving local firms some time to expand.

Liquor Makers

According to the terms of the agreement, whiskey and gin tariffs will be cut in half to 75% before falling to 40% in the tenth year. In 2022, India imported more than £200 million ($266 million) of whiskey from the United Kingdom, paying duty at a rate of 150 percent.

Diageo, which manufactures Johnnie Walker whiskey and Tanqueray gin, may benefit from this. Shares of its Indian subsidiary, United Spirits Ltd., rose as much as 2.8% on Wednesday.

According to Praveen Someshwar, managing director of Diageo India, the treaty will result in "improved accessibility and choice of scotch for Indian consumers" in the world's largest whiskey market.

According to Karan Taurani of Elara Capital, the duty reduction will reduce the prices of these drinks by 15% to 20%, making premium spirits more accessible to Indian buyers.

According to Taurani, the duty cuts may have a minor negative impact on homegrown liquor brands like Royal Ranthambore, which is marketed by Radico Khaitan Ltd. Its shares fell 3.6%. "Domestic players focused on upper prestige and above may see short-term aberration in growth," according to him.