Swaraj Baggonkar MoneycontrolUS President-elect Donald Trump’s stance on promoting local manufacturing will likely hit Indian-owned foreign auto companies such as Jaguar Land Rover and SsangYong Motor Company.
On Monday Trump warned German luxury car-making companies such as Mercedes-Benz, BMW and Audi about imposing a steep anti-import tax of 35 percent on vehicles imported to the US.
"If you want to build cars in the world, then I wish you all the best. You can build cars for the United States, but for every car that comes to the USA, you will pay 35 percent tax," Trump said to the German newspaper Bild.
Tata Motors-owned Jaguar Land Rover, generates 25 percent of its total volumes from the US market, making it the largest market for the two luxury brands, according to a presentation made by Tata Motors. However, it does not have a manufacturing or an assembly plant in that country.
If Trump indeed slaps such a steep tax on the imported luxury cars in the US it would make JLR models expensive thus hurting sales. The two brands, which generate over 90 percent of Tata Motors’ profits, recorded a growth of 25 percent in the US during the fiscal year ended December 2016.
Over the last few years JLR announced manufacturing plans in countries where costs are comparatively lower than in the US. These include India, China, Brazil, Slovakia and Austria. Besides, investments were also made at its mother plants in the UK.
"I would tell BMW that if you are building a factory in Mexico and plan to sell cars to the USA, without a 35 percent tax, then you can forget that," Trump said in the interview.
"Jaguar Land Rover is growing its global manufacturing footprint and regularly evaluates opportunities around the world. No decisions have been made," said a Jaguar Land Rover spokesperson in a reply to a questionnaire sent by Moneycontrol.
Similarly, Trump’s warning could upset plans of Mahindra & Mahindra-owned SsangYong Motor Company, which is looking at the US market as a ‘make-or-break’.
According to SsangYong’s Chief Executive Choi Johng-sik the company set a deadline of 2019 to enter the US market. Ssangyong currently has a vehicle manufacturing facility only in South Korea.
"It is true that there are many concerns about the US entry. We think the US project will make or break our company. So we'll have full discussions with Mahindra," Choi had said to reporters on the sidelines of the launch of Ssangyong Tivoli Air compact SUV last year.
At least 31 percent of SsangYong’s volumes comes from outside South Korea. Western Europe accounts for 44 percent of total export volumes, making it the largest market outside Korea, followed by 23 percent of South America.
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