India-UK FTA slashes import duties on British-made ICE and EV vehicles, opens door for high-end carmakers as tariffs fall to as low as 10% over 15 years.
In a game-changing move for the Indian auto market, the India-UK Free Trade Agreement (FTA) will significantly lower tariffs on British-made luxury and zero-emission vehicles, making high-end imports more affordable and potentially reshaping the premium car landscape.
Currently, India imposes steep import duties ranging from 70% to 110% on passenger vehicles and 40% on trucks. But under the new Comprehensive Economic and Trade Agreement (CETA), these duties will see a phased reduction through tariff-rate quotas (TRQs), capping import volumes while offering sharply lower rates.
Here’s what changes under the FTA:
Importantly, there will be no duty reductions on out-of-quota EVs, a move aimed at shielding domestic manufacturers of green vehicles.
Trucks and commercial vehicles also gain under the agreement, with ICE truck duties reduced to 37% in the first year (within a 2,500-unit quota), falling to 8.8% by the tenth year. However, electric and hydrogen-based trucks do not benefit from the duty cuts.
According to Saurabh Agarwal, Automotive Tax Leader at EY India, the 10% import duty rate for UK-made cars marks “one of the most significant outcomes of the FTA” and could drive global manufacturers to set up factories in the UK to tap into India’s lucrative market.
However, access to reduced tariffs is contingent on a minimum 35% UK-origin content under the Qualifying Value Content (QVC) rule — a strategic filter that maintains the spirit of bilateral manufacturing partnerships.
While the deal opens India’s doors wider to global carmakers, it’s also a calculated move — using quotas and origin rules to strike a balance between consumer access and domestic industry protection.
Notably, India’s car imports from the UK dropped 46% to $72 million in FY25 from $134 million the previous year — a trend that could reverse dramatically as the new tariff regime takes hold.
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