India has granted limited access to UK-based carmakers under the FTA, offering significant import duty cuts and large quotas for high-end vehicles in the initial years. However, the concessions are more restrictive for mainstream luxury cars, and UK manufacturers will be barred from entering India’s electric vehicle market for the first five years.
The duty reductions and quotas primarily apply to vehicles with large engine capacities (petrol engines above 3000 cc and diesel engines above 2500 cc) in the initial years of the FTA. These vehicles typically cost over Rs 1 crore and constitute a negligible share of India’s car market. Industry experts suggest that even with lower duties and reduced prices, the impact on domestic automakers will remain minimal.
Saket Mehra, Partner, Grant Thornton Bharat said that the FTA will make British luxury brands more accessible to Indian consumers, while maintaining protections for the mass-market segment through price thresholds and origin rules.
“A key provision is the phased reduction of import duties on UK-built passenger vehicles- from over 100% to 10% - under a quota system. In FY24, India imported passenger vehicles worth approximately USD 78.3 million from the UK, a figure expected to rise significantly under the new tariff regime,” stated Mehra.
Saurabh Agarwal, Partner and automotive tax leader at EY India, said the agreement is designed with safeguards to protect domestic players, including import quotas and rules of origin, helping maintain a balance between trade liberalisation and industry stability. “The move could also give a technological edge to the Indian auto market, especially in the high-end segment where imports continue to play a key role in bridging capability gaps,” added Agarwal.
The FTA also ensures that the number of vehicles from ICE engines will be deducted by the number of EV vehicles getting concessions from the 6th year onwards to maintain the total quota volume of 37,000 units at the end of 15 years of duty concession. For cars priced below £40,000 (cost, insurance and freight (CIF)), no market access is provided, ensuring complete protection for the mass-market EV segment.
Cheers for JLR and other British brands
The FTA is expected to boost British luxury car brands in India by lowering prices of some highly sought-after models. Tata Motors' British subsidiary JLR, 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.
Last fiscal, JLR emerged as the third-largest luxury carmaker in India by selling 6,183 units. Around 60% of the cars JLR sells in India, including popular models in the Range Rover portfolio - Range Rover, Range Rover Sport, Velar and Evoque - are locally produced in India through the CKD (completely knocked down) route, attracting a lower tax.
The Defender, one of JLR's most sought-after models, is manufactured in Slovakia and thus falls outside the FTA's scope. Currently, only a limited number of high-value SUV models are exported from the UK to India, and these will qualify for benefits under the agreement. Other British premium brands, such as Rolls-Royce, Aston Martin, Bentley, McLaren and Lotus, only sell through CBUs in India.
Sunil Kalra, Partner, Governance, Risk and Compliance & Forensic Investigation at Forvis Mazars in India said that the India-UK FTA presents a major opportunity for British luxury carmakers like Rolls-Royce, Bentley, Aston Martin, and McLaren. “With potential tariff cuts on fully imported vehicles, these brands can finally become more price-competitive in India a market that’s fast maturing in the luxury segment…For British luxury brands, India is no longer just aspirational, it’s commercially viable,” stated Kalra.
Demand for similar FTA likely from EU and other trading partners
India and the United Kingdom signed the Comprehensive Economic and Trade Agreement (CETA) on Thursday, aiming to double their bilateral trade by 2030 from the current $56 billion. As part of the India-UK trade deal, India will slash import duties on automobiles—currently as high as 110%—to just 10% under a quota system applicable to both nations.
Industry experts believe that other economies would also seek similar treatment from India to gain better access to the world’s third-largest car market. At present, India’s luxury car market accounts for less than 2% of the total passenger vehicle (PV) volume and is dominated by German brands such as Mercedes-Benz and BMW.
Think tank body GTRI said that the tariff Rate Quota (TRQ) marks a major policy shift, especially as India has long used high tariffs to protect its domestic automotive industry. “By year five, up to 37,000 UK-built ICE vehicles could enter India annually at just 10% duty—far below the current base rate of 110%. This creates a preferential entry path for high-end British brands such as Jaguar and Land Rover, both owned by Tata Motors, but also for other UK-based exports,” it added.
GTRI stated that while the measure is capped in volume and spread over 15 years, the policy sets a precedent in opening India’s tightly controlled automobile market to bilateral trade partners—potentially triggering similar demands in future FTAs. This is India’s first-ever auto tariff concession in any FTA, and it’s likely to trigger similar demands from Japan, the EU, South Korea, and the U.S, it said.