The recently signed India-UK Free Trade Agreement (FTA) is expected to bring major changes to the automotive sector in both countries.
One of the most notable outcomes is the sharp reduction in import duties on British-made vehicles, which could lead to a significant price drop for high-end brands such as Rolls-Royce, Bentley, Land Rover, Aston Martin, and Norton in the Indian market.
Previously, fully imported cars from the UK were subject to a hefty 100% import duty. With the FTA in place, this has been reduced to just 10% – although under a pre-defined quota. This change is expected to make British luxury vehicles much more accessible to Indian buyers, spurring interest and increasing competition in India’s premium car segment.
According to Saket Mehra, Partner and Auto & EV Industry Leader at Grant Thornton Bharat, the reduced tariffs could trigger a wave of premium vehicle imports. In FY2024, India imported approximately $78.3 million worth of passenger vehicles from the UK – a figure that could now rise with the new agreement in place.
Additionally, the FTA supports greater collaboration in auto components, another key area of trade. India exported $191.6 million worth of automotive parts to the UK in FY2024, while importing around $138.6 million. With tariff barriers being lowered, Indian manufacturers may find it easier to scale their presence in the UK and beyond. This could further support India’s aspirations to become a global automotive hub, particularly in the electric vehicle (EV) and sustainable mobility segments.
The agreement also opens up opportunities for Indian Original Equipment Manufacturers (OEMs), allowing them easier access to the UK and potentially broader European markets. The FTA aligns with India’s ‘Make in India’ mission and encourages investment, innovation, and technology exchange within the industry.
Rohan Kanwar Gupta, Vice President & Sector Head at ICRA, emphasised that while lower import tariffs on vehicles and parts might slightly impact Indian manufacturers, the country’s cost competitiveness ensures their growth will not be hindered. Exports, being more profitable, are likely to see a boost under this deal.
One of the big beneficiaries of this trade deal is TVS Motor Company, which owns UK-based Norton Motorcycles. Sudarshan Venu, Managing Director of TVS, lauded the agreement, highlighting its role in accelerating Norton’s India launch by the end of 2025. The iconic British brand is expected to debut with models such as the Norton 961 and Norton V4, leveraging shared supply chains and increased market access.
It’s important to note that the FTA limits the number of internal combustion engine (ICE) vehicles that can be imported under the reduced tariff. While EV imports will be allowed in greater numbers, no additional tariff reductions are being offered for them under the current agreement.
However, potential challenges remain.
The UK’s Carbon Border Adjustment Mechanism (CBAM) could affect Indian exports if levies are imposed, especially while UK goods enter India at reduced tariffs. Negotiations and regulatory clarity on this issue will be essential in determining the full benefits India can expect from the deal.