India-UK FTA: Premium push while safeguarding domestic interest

New Indian Express

5 days ago

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.