Britain and India signed a trade agreement to cut tariffs, and Jaguar Land Rover, Diageo (DEO.US), etc. became potential winners

The Zhitong Finance App learned that as part of a comprehensive trade agreement, India has decided to cut tariffs on products such as cars and whiskey made in the UK. This move will benefit companies such as Jaguar Land Rover (Jaguar Land Rover) and DiaoGio (DEO.US).

After three years of negotiations, the free trade agreement announced by the two countries on Tuesday will reduce the cost for British companies to sell whiskey, cars, auto parts, cosmetics, cookies, clothing, and motors to the world's most populous country. 99% of India's exports of goods and services to the UK will also benefit from lower tariffs.

The agreement opened up India's originally highly protected industries, such as the automobile industry. It also set a precedent for other trade agreements currently being discussed, such as those with the European Union and the US. These bilateral agreements will also provide a buffer to mitigate the impact of tariffs imposed by US President Donald Trump.

Radhika Rao, an economist at DBS Bank Ltd. (DBS Bank Ltd.), stated in a May 7 report that the trade agreement could take effect in a year. The bilateral trade volume is expected to nearly double within a few years from $21 billion for the year ending March 2024, she wrote.

While exporters and businesses await the terms of the agreement, potential winners and losers have also surfaced. The automobile industry is generally favorable. According to information on the British government website, India's tariffs on automobiles will be reduced from 110% to 10%. This measure will first apply to fuel vehicles, and will gradually cover electric vehicles and hybrid vehicles within 10 years.

The UK will also provide opportunities for Indian automakers to export relevant technology to the UK, with similar conditions.

Beneficiaries may include Jaguar Land Rover and luxury car brands with factories in the UK, such as Bentley (Bentley), Aston Martin (Aston Martin), Vauxhall (Vauxhall), and Mini (Mini).

Local automakers that invest in the electric vehicle sector, such as Mahindra & Mahindra Ltd. (Mahindra & Mahindra Ltd.) and Maruti Suzuki India Ltd. (Maruti Suzuki India Ltd.), could be impacted. It is currently unclear how these tariff preferences will be implemented and what the price threshold will apply to low-tariff imported cars.

Although this is the first time that India has taken steps to open up its burgeoning electric vehicle market, India did not allow British car makers to immediately enter at low cost, which provided some room for development for local companies.

Alcohol makers will also get a boost. According to the terms of the agreement, tariffs on whiskey and gin will be halved to 75% and reduced to 40% in the 10th year of the agreement's entry into force. In 2022, India imported more than £200 million (US$266 million) worth of whiskey from the UK, with a tariff rate of 150%.

Diageo, which produces Johnnie Walker (Johnnie Walker) whiskey and Tanqueray (Tanqueray) gin, could benefit. Shares of the company's Indian subsidiary United Spirits Ltd. (United Spirits Ltd.) rose 2.8% on Wednesday.

Diageo India managing director Pravin Someshwar said in a statement that the treaty will make Scottish whiskey more accessible and more selective for Indian consumers.

Elara Capital's Karan Taurani said that tariff cuts will reduce the price of these alcoholic products by 15%-20%, making it easier for Indian buyers to buy high-end spirits.

Taurani believes that tariff cuts may have a slight negative impact on local alcohol brands such as Royal Ranthambore (Royal Ranthambore) under Radico Khaitan Ltd. (Radico Khaitan Ltd.). The company's shares fell 3.6%. “Local brands focused on the high-end market and above are likely to experience growth fluctuations in the short term,” he said.

Other affected industries include textile manufacturers, medical device industry, financial services industry, etc. The Federation of Indian Export Organisations said that the elimination of tariffs will enhance the competitiveness of Indian clothing when competing with countries such as Bangladesh and Vietnam. Clothing is India's second-largest export category to the UK. India exported 900 million pounds worth of clothing to the UK in 2024.

After the tariff adjustments, Indian exporters will be able to sell medical devices to the UK at a lower cost. Furthermore, the UK government stated on its website: “The agreement will ensure the ability of British companies to provide financial services to Indian customers.”