Auto File -Trump sticks to his guns on tariffs

By Aditi Shah, India Autos Correspondent

Aditi.shah@thomsonreuters.com

Greetings from New Delhi!

U.S. President Donald Trump has a favourite number – 15. His trade partners, though, would prefer a zero.

In trade deals with the European Union and South Korea, Trump has stuck with his 15% tariff despite appeals from European carmakers for lower rates and lofty investments promised by Korean companies.

They still seem to have gotten a better deal than India, where exporters are gearing up to pay 50% tariff on exports to the United States starting August 27, and China which is yet to see the end of Trump’s wrath.

Which brings us to today’s Auto File ...

- Trump’s deals with South Korea and EU

- Nissan’s troubles mount as Mercedes sells stake

- India wants to make small cars cheaper

* Trump’s tariffs and deals

South Korea is betting that its promises to "Make America Shipbuilding Great Again" will sway Trump into going easy on tariffs that are currently set at 15%. South Korean President Lee Jae Myung made his first official visit to the White House this week to discuss trade and other details against the backdrop of a pledge by Korean companies to inject $350 billion into U.S. projects.

Shipbuilding has emerged as one of the most concrete areas of investment, with $150 billion earmarked for the sector, that once dominated in the United States but fell into decay after World War Two. Other sectors include steel and auto manufacturing where Hyundai Group pledged to invest $26 billion, as well as aerospace and critical minerals. Despite this, the 15% tariff will remain.

The EU, however, is hopeful that its long-term demand to reduce the 15% tariff on automobile exports to the U.S. – one of its biggest markets – will be met. In a joint statement last week, the U.S. said it would apply a tariff below 15% only on EU aircraft and parts, generic pharmaceuticals and ingredients, chemical precursors and unavailable natural resources, including cork. But this would not apply to wine or spirits, a key EU demand.

The good news? Both sides have agreed to consider other sectors and products for inclusion, raising hopes that autos might be taxed lower too.

India and China have had less success so far. The U.S. issued an order late on Tuesday that will impose a 50% tax on Indian imports, a move that is making investors in the country’s textile and pharmaceutical companies nervous. The Indian government has “no hope” for any immediate relief or delay in U.S. tariffs.

Trump has also threatened a 200% tariff on Chinese imports if Beijing does not give magnets to the U.S., escalating an already painful trade war between the two nations.

Essential reading:

China car wars have surprising winners

Musk’s silent U-turn on a new political party

Lyten tries to succeed where Northvolt failed

* Nissan’s never-ending pain

The pension trust of German automaker Mercedes-Benz sold its entire stake in Nissan Motor for about $325 million, causing more losses for investors in the Japanese company, whose shares fell 6%.

The slide highlights investor scepticism over Nissan's turnaround prospects as it battles tariffs and falling sales in its key markets, like the United States and China. Nissan’s new CEO Ivan Espinosa faces an uphill task turning around the troubled Japanese automaker with no guarantee it can reverse sliding sales, even as he moves to slash costs.

With a lack of fresh models, new tariffs in its biggest market, and stiff competition from local and Chinese rivals, Nissan will be hard-pressed to shore up sales, which have plunged 42% since the 2017 business year.

* Suzuki’s big India bet

Japanese carmaker Suzuki Motor has promised to invest $8 billion in India to grow its presence in what is its “most important market”. India is already a production hub for Suzuki’s gasoline cars and on Tuesday the carmaker rolled out its first EV from its new plant in Gujarat state. Most of the EVs manufactured at the plant will be exported to Japan, Europe and 100 other countries.

Suzuki is increasing its bet on India even as its local unit Maruti Suzuki, known for its small and affordable cars, is losing market share to rivals that are wooing buyers with bigger, feature-rich SUVs. But the investment could be well-timed. India wants to make its small cars cheaper and is planning an overhaul of its consumption tax. India currently levies 28% tax on small cars plus additional subsidies. It now plans to bring this down to 18%.

Lower taxes could boost small car sales and in turn Suzuki’s fortunes in what has been its most profitable market.

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