India-UK FTA: Import of Britain-made luxury cars to get cheaper
Under the agreement, tariffs on imports of internal combustion engine (ICE) cars will be slashed to 30-50 per cent in the first year of implementation, with the benefit limited to a quota of 20,000 cars. The tariffs will be reduced gradually, and after 15 years, they will become 10 per cent, with the quota set at 15,000 units. For out-of-quota imports of ICE cars, the duties are reduced to 60-95 per cent in the first year, and further to 45-50 per cent from the tenth year onwards.
Currently, India's import tariffs on passenger vehicles range from 70-110 per cent while those on trucks stand at 40 per cent. Industry executives said that import quotas have been implemented to avoid sudden surges in imports and safeguard the Indian auto industry.
This reduction, ranging from 16 per cent to 56 per cent over a period up to 5 years on ICE vehicles up to 2500 cc (diesel)/3000 cc (petrol) and 80 per cent to 100 per cent over a period of 5 years on ICE vehicles more than 2500 cc (diesel)/3000 cc (petrol), is expected to make high-end vehicles more accessible.
For electric vehicles (EVs), hybrids, and hydrogen fuel-based cars, tariffs have been eliminated entirely for units priced under £40,000 CIF (cost, insurance and freight value). For zero-emission cars priced between £40,000 to £80,000, tariffs are reduced to 50 per cent and a quota of 400, which from the fifteenth year will become 10 per cent and 2,000 respectively.
For more expensive zero-emission cars (above £80,000), duties will start at 40 per cent with a quote of 4,000 units, which from the fifteenth year will become 10 per cent and 20,000 respectively. The new tariff rates are likely to benefit automakers such as Jaguar Land Rover.
It is worth noting that the agreement does not provide for reduced out-of-quota duties on zero-emission vehicles, a decision that will provide some relief to domestic EV and hybrid players.
In 2024-25, India's car imports from the UK fell by 46 per cent to $72 million from $134 million in 2023-24.
For ICE trucks, the tariffs are slashed to 37 per cent for the first year, with a quota of 2,500. From the tenth year onwards, tariffs drop further to 8.8 per cent, with the quota set at 3,500. The agreement does not reduce duties for electric or hydrogen-based trucks.
'The substantial reduction of import duties to 10 per cent in 5 years for UK cars represents one of the most significant outcomes of the FTA and is poised to transform the car market in India, particularly for Completely Built Units (CBUs) due to the drastic duty cut. However, it is crucial that the cars meet the originating criteria of 35 per cent of Qualifying Value Content ('QVC') i.e. the material of UK origin is 35 per cent of total material used,' said Saurabh Agarwal, partner and automotive tax leader at EY India.
He added that since the reduced duty benefits apply to all automobiles manufactured in factories located in the UK, non-UK carmakers may consider establishing factories in the UK to take advantage of the reduced rates and maintain their market share in India.
Aggam Walia is a Correspondent at The Indian Express, reporting on power, renewables, and mining. His work unpacks intricate ties between corporations, government, and policy, often relying on documents sourced via the RTI Act. Off the beat, he enjoys running through Delhi's parks and forests, walking to places, and cooking pasta. ... Read More
Soumyarendra Barik is Special Correspondent with The Indian Express and reports on the intersection of technology, policy and society. With over five years of newsroom experience, he has reported on issues of gig workers' rights, privacy, India's prevalent digital divide and a range of other policy interventions that impact big tech companies. He once also tailed a food delivery worker for over 12 hours to quantify the amount of money they make, and the pain they go through while doing so. In his free time, he likes to nerd about watches, Formula 1 and football. ... Read More
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