India-UK Free Trade Agreement; Automotive Brands That Stand To Benefit From The FTA

India and the United Kingdom have recently signed a free-trade agreement (FTA), with discussions first held in 2022. Now that the FTA has been signed, it is likely that British manufactured vehicles could see a reduction in exports and imports between the two countries. This means that luxury four wheelers from brands like McLaren, Aston Martin, Land Rover, Bentley, Rolls-Royce will no longer attract 100 per cent import duties, instead automobiles manufactured in UK and imported into India will only attract 10 per cent duty. This brings in a decent amount of cheer from a small yet substantial customer base in India, with British luxury cars likely to become significantly cheaper. 

Saket Mehra, Partner and Auto & EV Industry Leader, Grant Thornton Bharat, said, "The recently signed India-UK Free Trade Agreement (FTA) 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 per cent to just 10 per cent under a defined quota-which is expected to make luxury brands significantly more accessible in India. This move could catalyse a surge in premium vehicle imports and intensify competition in the high-end segment. In FY2024, India imported passenger vehicles worth approximately $ 78.3 million from the UK, a figure likely to rise under the new tariff regime.

Equally impactful is the FTA's focus on auto components. In FY24, India exported auto parts worth approximately $ 191.6 million to the UK, while imports stood at around $ 138.6 million. With tariffs on components set to be significantly reduced, Indian manufacturers are well-positioned to expand their footprint in the UK market. The agreement also enhances market access, encourages technology collaboration, and fosters synergies across the supply chain, strengthening India's role in the global automotive ecosystem. 

The agreement further opens new doors for Indian original equipment manufacturers (OEMs), offering them easier access to the UK and potentially broader European markets. This aligns with India's "Make in India" vision and supports the country's ambitions to become a global automotive hub, particularly in electric mobility and sustainable transport.

However, the treatment of the UK's Carbon Border Adjustment Mechanism (CBAM) will be crucial. If Indian exports continue to face CBAM levies while UK goods enter India duty-free, it could impact the benefits India expects to reap from the FTA. Overall, the FTA is a strategic win for both nations, fostering innovation, investment, and long-term growth in the auto sector."

Also Read: India And UK Sign Free Trade Agreement; Likely Reduction In Auto Import Tariffs

Rohan Kanwar Gupta, Vice President & Sector Head, Corporate Ratings, ICRA, said, "The Indian auto component industry demand benefits from a diversified mix of end-user segments and geographies. While domestic sales constitute about 70-75 per cent of the revenues, export remains an attractive segment for the industry given that it entails higher profitability. Amidst the ongoing uncertainty with regards to imposition of tariffs by the US government, 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 as the import tariffs on parts/vehicles imported from the UK have also been materially lowered, the impact of the same on the revenue growth prospects of the Indian manufacturers is expected to remain limited, given their cost competitiveness." 

Sudarshan Venu, MD, TVS Motor Company, said, "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. We really appreciate the effort taken by the Government to make this historic India-UK Free Trade Agreement. 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." 

What needs to be noted is the fact that the import of ICE vehicles from UK will be limited to a pre-defined quota. For EVs, the number of units imported will be more but there will be no further reduction in import tariffs. This also greatly helps Indian automotive manufacturers like TVS who announced that its subsidiary, UK-based Norton Motorcycles, will make its India debut by the end of 2025. The modern classic motorcycle company is likely to begin its India innings with the Norton 961 and the Norton V4.