Recently, after more than three years of negotiations, India and the United Kingdom have signed a long-awaited Free Trade Agreement (FTA) that promises to reshape trade dynamics between the two nations. Among the key sectors affected is the automobile industry, where major tariff relaxations are now in place, though not without caveats.
According to the agreement, approximately 99 per cent of goods produced and exported from India, including automobiles, will now enter the UK duty-free. Conversely, the import duty on fully built cars brought into India from the UK has been drastically reduced—from a staggering 110 per cent to just 10 per cent. However, the specific criteria for availing these reduced tariffs are still being finalised, and a new report offers insights into how they may be organised.
As per the report of The Hindu, a senior Indian government official confirmed that the 10 percent import duty would be applied within a quota system, further categorized by type and specifications of vehicles. For internal combustion engine (ICE) cars, eligibility under the quota will be determined by engine capacity. Meanwhile, for electric vehicles (EVs), the classification will be based on the price of the vehicle.
Interestingly, “futuristic cars” and “low-cost” vehicles will be excluded from this preferential framework, although further clarification is awaited on the definitions of these categories. Also, as part of the agreement, duties on eligible vehicle imports will be phased down progressively over the next 10 to 15 years.
To streamline trade logistics and enhance transparency, both countries have agreed to implement electronic certificates of origin. This digital shift is expected to reduce dependence on components from “unfriendly” nations like China, while also saving UK-based temporary workers and their employers nearly INR 4,000 crore annually.
While the current FTA covers cars, imported two-wheelers are not mentioned yet, leaving a gap in clarity for that segment of the industry. Nonetheless, experts anticipate that the deal could incentivise British automakers, particularly luxury brands—to establish manufacturing bases in India, potentially reshaping the country’s auto sector.
As the finer details of the FTA unfold, automakers and stakeholders on both sides are closely monitoring how the agreement will impact production plans, investment strategies, and market expansion, turning into a Game-Changer for Auto Trade.
