AUTOS: Shift into High

Since 1920, the British auto industry has been working under the protective wraps of an auto tax of £1 a horsepower. Thus, low-powered British cars were taxed as little as £10 ($40) a year, while higher-powered U.S. cars were taxed $130 or more. So Britons bought small British cars. That pleased the protectionist manufacturers.

But the wraps became a strait jacket. The small British cars could not compete in the foreign market. If manufacturers wanted to sell abroad, they had to make bigger export models, an expensive process. So production remained small, prices high, and there was little standardization.

Last week Britons decided that if autos were to pull their weight in the export program, the strait jacket had to go. So, beginning next Jan. 1, there will be a flat annual tax of £10 ($40) on all new autos, regardless of horsepower.

Now British manufacturers can concentrate on a few medium-horsepower models that will sell at home, compete better with U.S. cars abroad. For example the Nuffield organization (Morris Motors, Ltd.), now producing 24 models, will reduce to twelve. But carmakers will probably need two years to retool for the new models. The new tax will help U.S. automakers also. Eventually, when they are able to export freely again to Britain, they will be in a much-better position to compete for the British home market.