The landmark India UK FTA (Free Trade Agreement) has been officially signed, ushering in a new era for car buyers and the automotive industry in both nations. In a historic move, the agreement will slash import duties on luxury, hybrid, and electric vehicles brought into India from the United Kingdom, making world-renowned brands far more accessible for Indian consumers. Here’s a detailed breakdown of everything you should know about the India UK FTA, how it impacts car prices, and what it means for the future of the automotive market.
India UK FTA: Major Shift in Import Duty Structure
The signing of the India UK FTA was witnessed by Prime Minister Narendra Modi and UK Prime Minister Keir Starmer, alongside India’s Commerce Minister Piyush Goyal. This trade pact is one of the most substantial developments in Indo-UK trade relations in recent years and is designed to stimulate not only bilateral trade but also the luxury automobile segment in India.
A central feature of the agreement is the reduction of import duties on completely built-up (CBU) cars, which are typically luxury and high-value models made abroad and imported as finished products.
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Import Duty Slabs under India UK FTA (Petrol & Diesel CBUs)
| Year | Duty (%) Petrol >3L, Diesel >2.5L | Quota (units) | Duty (%) Petrol 1.5–3L, Diesel 1.5–2.5L | Quota (units) | Duty (%) <1.5L | Quota (units) | Total Quota |
|---|---|---|---|---|---|---|---|
| Current | 110 | – | 66 | – | 66 | – | – |
| Year 1 | 30 | 10,000 | 50 | 5,000 | 50 | 5,000 | 20,000 |
| Year 5 | 10 | 19,000 | 10 | 9,000 | 10 | 9,000 | 37,000 |
| Year 15+ | 10 | 7,500 | 10 | 3,750 | 10 | 3,750 | 15,000 |
Key points:
- The India UK FTA gradually reduces import duties on large-engine petrol and diesel CBUs from 110% to just 10% over five years.
- Quotas for each category steadily rise until year five and then reduce over the course of the next decade.
- Any imports over the quota are subject to higher—though still reduced—duties.
Duty Reduction for Electric, Hybrid, Hydrogen Vehicles
The India UK FTA also creates special tariff categories for alternative fuel vehicles, such as electric and hybrid cars:
Import Duty on Electric, Hybrid, Hydrogen Cars (Under India UK FTA)
| Year | Duty (GBP 40,000–80,000) | Quota | Duty (>GBP 80,000) | Quota | Duty (<GBP 40,000) |
|---|---|---|---|---|---|
| 1–5 | 110% | – | 110% | – | 110% |
| 6 | 50% | 400 | 40% | 4,000 | 110% |
| 10 | 10% | 1,200 | 10% | 12,000 | 110% |
| 15+ | 10% | 2,000 | 10% | 20,000 | 110% |
- Only vehicles above GBP 40,000 (about ₹46.7 lakh) benefit from the new rules, leaving affordable electric and hybrids unchanged in duty.
- The total import quota for premium alternative-fuel vehicles rises to 22,000 units a year after 15 years.
How Will Carmakers and Buyers Benefit?
According to Autocar India report, the primary beneficiaries of the India UK FTA are luxury car brands manufacturing in the UK and exporting CBUs to India, including Aston Martin, Bentley, McLaren, JLR (Jaguar Land Rover), Rolls-Royce, and Mini. Price reductions are expected to create a surge in demand, with some brands—such as Mini—already launching price protection programs for popular models like the Mini 3-Door to pass savings to customers.
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Key Points for Car Buyers
- Luxury cars will become far more affordable.
- Premium EVs and hybrids above ₹46.7 lakh will see significant price cuts starting sixth year after the FTA.
- No relief for entry-level, mass-market, or budget electric cars.
- The structure is quota-based, so bargain deals may be limited to certain units or brands.
India UK FTA: Comparison of Duties (CBUs Out of Quota)
| Year | Large Petrol (>3L)/Diesel (>2.5L) | Med. Petrol (1.5–3L)/Diesel (1.5–2.5L) | Small (<1.5L) |
|---|---|---|---|
| Current | 110% | 66% | 66% |
| Year 10 | 50% | 50% | 45% |
Even CBUs exceeding quota still enjoy significant reductions via the India UK FTA, making the UK a more attractive import source than ever for luxury brands.
Impact on the Automobile Market
1. Luxury car segment boost:
With the India UK FTA slashing duties, UK-made cars are now much more competitive versus rivals from Germany or the US.
2. No relief for small cars or affordable EVs:
Cars and SUVs priced under GBP 40,000 see no reduction in duties, so the sub-₹40 lakh segment remains unchanged.
3. Incentive for new models:
Brands may introduce more specialized, high-value models to maximize quota and tariff benefits.
4. Increased luxury car accessibility:
Indian consumers now have a more feasible path to owning world-class luxury vehicles without the earlier steep price barrier.
Key Takeaways of the India UK FTA
- Five-year phase-down: Duties drop from 110% to 10% for eligible CBUs, with parallel reductions for out-of-quota imports.
- Quota-limited benefits: Only a set number of cars receive the lowest rates each year.
- Electric and hybrid focus: By year 6, select premium EVs and hybrids see tariffs slashed to as low as 10%.
- Boost for British brands: UK luxury manufacturers enjoy a market advantage in India.
Challenges and Criticisms
- Implementation details for quotas: The method for distributing quotas among brands is still unclear.
- No benefit for small car buyers or affordable EV fans: Duties remain high outside premium brackets.
- Slow ramp-up for alternative-fuel vehicle benefits: Lower duties phase in slowly, beginning only after five years.
India UK FTA and Indian Auto Buyers—What Lies Ahead?
As the India UK FTA reshapes luxury car pricing and access, Indian buyers and industry stakeholders await details on quota allocation and potential launch timelines for UK-made vehicles at new price points. The real question is whether this trade pact will spark competition, further duty cuts, or even inspire new budget-friendly segments in the future.
India UK FTA stands out as a game-changer—opening up India’s luxury market, strengthening trade ties, and creating fresh excitement for UK automotive brands. Discerning buyers and the entire industry will be watching closely as the next chapter of international auto trade unfolds.