In a major step toward boosting bilateral trade, India and the United Kingdom have officially signed a Free Trade Agreement (FTA), an initiative that has been under discussion since 2022. This deal promises to reshape the automotive landscape between the two countries — benefiting not just British luxury car enthusiasts in India but also India’s growing automobile and auto components industry.
One of the most eye-catching changes brought by this agreement is the dramatic reduction in import duties for British-manufactured vehicles. Until now, cars imported from the UK attracted a steep 100% import duty, doubling their prices for Indian buyers. With the FTA in place, this duty has now been reduced to just 10% for a defined quota of vehicles. That’s a massive shift — and it’s expected to make luxury vehicles from brands like McLaren, Aston Martin, Land Rover, Bentley, Rolls-Royce, and Norton much more accessible to a growing segment of affluent Indian buyers.
As Saket Mehra, Partner and Auto & EV Industry Leader at Grant Thornton Bharat, pointed out:
“The recently signed India-UK Free Trade Agreement is poised to reshape the automotive landscape between the two nations. A standout provision is the dramatic reduction in import tariffs on British-manufactured vehicles, from 100% to just 10% under a defined quota—expected to make luxury brands significantly more accessible in India.”
He added that in FY2024, India imported passenger vehicles worth about $78.3 million from the UK, and this figure is likely to rise as the reduced duties spark a surge in high-end vehicle imports.
But this trade deal isn’t just about importing luxury. It’s also about boosting India’s exports — especially in the area of auto components. In FY2024 alone, India exported auto parts worth approximately $191.6 million to the UK, while imports from the UK stood at around $138.6 million. With tariffs on components also seeing a significant reduction, Indian auto parts manufacturers are now better positioned to expand their global footprint.
Beyond just numbers, the FTA enhances market access and opens doors for technology collaboration, supply chain synergy, and deeper business ties between the two automotive sectors. The deal also supports India’s long-term goals, particularly the “Make in India” vision, and strengthens its position as a global automotive hub — especially in the areas of electric mobility and sustainable transport.
However, there are still areas that need to be watched closely. One of them is the UK’s Carbon Border Adjustment Mechanism (CBAM). If Indian goods continue to face CBAM-related levies while UK-made vehicles enter India duty-free, it could create an uneven playing field. Experts agree that a balanced approach will be key to ensuring that the benefits of the FTA are fully realized on both sides.
Rohan Kanwar Gupta, Vice President & Sector Head, Corporate Ratings at ICRA, shared his take:
“The recent FTA signed with the UK government and the resulting decline in tariff barriers is likely to aid the export growth prospects of the industry over the medium term. Even though tariffs on parts and vehicles from the UK have been lowered, the impact on Indian manufacturers’ revenue is expected to remain limited — thanks to their cost competitiveness.”
This sentiment is echoed by industry leaders who see the FTA as a strategic opportunity. Sudarshan Venu, Managing Director at TVS Motor Company, praised the government’s efforts and expressed enthusiasm about leveraging the agreement to scale up operations:
“We applaud our PM’s vision to enhance India’s trade links globally. It creates large opportunities for Indian companies like ours to expand further and access new markets. Our British brand Norton will launch later this year and this agreement will help us scale faster and leverage common supply chains. We are excited as we further progress towards Viksit Bharat.”
An important point to note here is that the import of internal combustion engine (ICE) vehicles from the UK will be limited to a pre-defined quota under the FTA. For electric vehicles (EVs), the number of units that can be imported is higher, but there will be no further reduction in tariffs beyond what the agreement specifies. This ensures that Indian EV and ICE manufacturers can still compete on fair terms, while also allowing for a healthy infusion of high-quality imports into the market.
One interesting development is TVS’s announcement that Norton Motorcycles, its UK-based subsidiary, is set to debut in the Indian market by the end of 2025. Norton, known for its modern classic motorcycles, is likely to begin its India journey with the Norton 961 and the Norton V4 — two premium models that have already captured attention globally.
Conclusion
The India-UK Free Trade Agreement marks a milestone moment for both countries — not just in diplomatic or economic terms, but also in how everyday consumers and manufacturers will benefit. For Indian buyers, British luxury cars are about to become far more attainable. For Indian auto component makers and OEMs, a gateway to the UK and possibly wider European markets is opening up.
The agreement has created a win-win scenario: Indian firms can explore new horizons while British brands can connect more directly with one of the world’s fastest-growing markets. However, the real impact will be measured by how both governments navigate policy nuances like CBAM and ensure a balanced, long-term partnership.
Now it’s your turn:
What do you think about this new trade agreement?
Will it truly boost India’s position as a global auto hub, or will luxury imports overshadow domestic growth?
How do you see the future of electric and luxury vehicles evolving in India under this deal?
We’d love to hear your perspective. Drop your thoughts in the comments!
