NEW DELHI: Mexico’s resolution to lift tariffs as excessive as 50% will have an effect on $1 billion value of shipments from main Indian automobile exporters, together with Volkswagen and Hyundai, regardless of trade lobbying to steer New Delhi to stop such a transfer, based on two sources and a letter from an trade group reviewed by Reuters.
Mexican President Claudia Sheinbaum’s authorities permitted on Wednesday elevating import tariffs subsequent yr on a whole bunch of things from nations it doesn’t have commerce agreements with, together with China and India, to guard native jobs and manufacturing.
However the transfer additionally comes amid U.S. stress on Mexico to curtail enterprise with China, regardless of opposition from native enterprise teams warning that increased tariffs will elevate prices.
The import responsibility on automobiles will rise to 50% from 20%, dealing a major blow to India’s largest automobile exporters to Mexico together with Volkswagen, Hyundai, Nissan and Maruti Suzuki.
MEXICO TARIFF RAISES RISK FOR INDIAN MANUFACTURING
The Society of Indian Car Producers, an trade group that counts VW, Hyundai and Suzuki amongst its members, had urged India’s commerce ministry in November to press Mexico to “keep establishment” on tariffs for automobiles shipped from India, based on a duplicate of the letter.
“The proposed tariff hike is anticipated to have a direct affect on Indian vehicle exports to Mexico…we search Authorities of India’s help to kindly interact with the Mexican authorities,” the trade physique mentioned in its letter to the commerce ministry earlier than the tariff was finalised.
Particulars of the letter are being reported for the primary time. It was not instantly clear what steps the automobile makers, trade physique and Indian authorities will take subsequent.
The tariff hike might drive Indian automakers to reevaluate methods reliant on Mexico, which is India’s third-largest automobile export market after South Africa and Saudi Arabia.
Automotive producers in India have relied on exports to make sure manufacturing is maximised and there are economies of scale. Some additionally depend on exports to cushion slower home gross sales or enhance margins – a enterprise technique that will must be redrawn.
The tariff hike, which mirrors an increase in world tariffs, together with levies championed by U.S. President Donald Trump, might additionally complicate Prime Minister Narendra Modi’s efforts to market India as a low-cost manufacturing different to China.
India’s Commerce Ministry, Society of Indian Car Producers and the Mexican authorities didn’t reply to requests for remark.
Hyundai and Maruti Suzuki didn’t reply to requests for remark, whereas Nissan declined to remark.
Piyush Arora, chief of VW’s Indian unit, Skoda Auto Volkswagen, mentioned India has been a powerful export base for a few years and the corporate ships to greater than 40 nations from right here.
“Mexico has constantly been one in all our essential export markets, given the rising demand there and the traction of our India-made fashions,” Arora mentioned earlier than the tariffs have been permitted.
VOLKSWAGEN MOST EXPOSED TO MEXICO TARIFFS ON INDIA
India shipped items value $5.3 billion to Mexico within the final fiscal yr, of which automobiles made up near $1 billion, based on the letter and commercially out there customs information.
Skoda Auto accounts for almost 50% of India’s complete automobile shipments to Mexico. Hyundai shipped automobiles value $200 million, Nissan’s exports stood at $140 million and Suzuki’s at $120 million, the information confirmed.
In conferences with authorities officers final month, automobile makers mentioned nearly all of shipments from India to Mexico are compact automobiles with an engine measurement of lower than one litre, that are designed for the Mexican market and never for additional export to the U.S., one of many sources mentioned.
“Indian-origin automobiles should not a risk to Mexican native trade as Indian automobiles don’t cater to high-end segments manufactured by Mexico for serving the North American market,” the trade group mentioned in its letter.
Automotive makers additionally advised Indian officers that of the 1.5 million passenger automobiles offered in Mexico annually, about two-thirds are imported and India’s shipments make up “nearly 6.7 p.c” of the whole gross sales, based on the primary supply and the letter.
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