As many as 20,000 internal combustion engine (ICE) passenger vehicles (PVs) manufactured in the United Kingdom are expected to get cheaper in India as the two nations signed a landmark Free Trade Agreement (FTA) on Thursday. The number is significant as the total sales of all British car brands which have a presence in India was less than 6,500 units in FY25. This includes 6,183 units sold by Jaguar Land Rover.
As per the trade agreement, Completely Built Units (CBU) ICE cars whose engine size is more than 3000 cc (petrol) and more than 2500 cc (diesel) will see a reduction in duty from 110% to 50% in the first year when the FTA comes into effect. This will eventually come down to 25% in the 2nd year and progressively to 10% by the end of the 5th year. Quota size from this category will grow from 10,000 units in Year 1 to peak at 19,000 units in the fifth year. Following the 5th year, it will come down annually to stagnate at 7,500 units from the 15th year onwards.
Imported PVs, whose engine size ranges from 1500 cc (petrol and diesel) to 2500 cc (diesel) / 3000 cc (petrol), will see a reduction in duty from 66% to 50% in the first year of the FTA. This will progressively come down to 10% by the 5th year. Quota size from this category will grow from 5,000 units in Year 1 to peak at 9,000 units in the fifth year. Following the 5th year, it will come down annually to 3,750 units from Year 15 onwards. Reduction in duty and their quota size has been kept similar for vehicles whose engine size is up to 1,500 cc.
The out-of-quota customs duty rate at which made-in-UK cars will enter India has also been reduced.
There are no concessions given to electric, hybrid, and hydrogen-powered vehicles in the first 5 years. Green vehicles whose cost, insurance, and freight (CIF) is less than £40,000 have been kept out of the deal. Tariffs for green vehicles having CIF between £40,000 and £80,000 will come down to 50% from 110% from the 6th year of the FTA. However, quota size has been limited to just 400 units initially and will be progressively increased to 2000 units from the 15th year onwards. For cars having a CIF of more than £80,000, duty has been reduced from 110% to 40% from the 6th year. Quota size has been initially kept at 4,000 units which will grow to 20,000 units from the 15th year onwards. Duty on both categories will go down to 10% from Year 10.
India’s commerce ministry said that the concession framework is designed to provide market access to UK exporters mostly on large engine size ICE vehicles and high price range EVs while simultaneously protecting sensitive segments of India’s automotive industry (mid and small size engine capacity ICE vehicles and mid and low price range EVs).
“The number of vehicles from ICE engines shall get deducted by the number of EV vehicles getting concessions in the 6th year onwards to maintain the total quota volume of 37,000 Units at the end of 15 years of duty concession. For vehicles priced below £40,000 (CIF), no market access is provided, ensuring complete protection for the mass-market EV segment in which India seeks global leadership,” said the commerce ministry.
Tata Motors' British subsidiary Jaguar Land Rover, which is expected to benefit most from the FTA, said that over time the trade pact will deliver reduced tariff access to the Indian car market for JLR's luxury vehicles.
“India is an important market for our British-built products and represents significant future growth opportunities," said a JLR spokesperson. Other super luxury British car brands which have a presence in India include Lotus, Rolls-Royce, Bentley, McLaren, and Aston Martin.
Under the treaty, Indian carmakers will also benefit from the treaty as the UK will be slashing duty on made-in-India ICE cars and allowing duty free access to India-manufactured electric/hybrid/hydrogen-passenger cars from the sixth year of the FTA.
