India-UK trade deal: How will it benefit luxury car buyers in India? Explained in detail

The FTA introduced a detailed Tariff Rate Quota (TRQ) system, which allows for a progressive quota-based customs duty reduction system, which will be effective over a span of 15 years. This could significantly lower the prices of luxury cars made in the UK, including Rolls-Royce, Bentley, Jaguar, Land Rover, Aston Martin, and McLaren, for Indian buyers. While the luxury car market in India is currently dominated by German auto majors like Mercedes-Benz, Audi, and BMW, the market share of the British brands may increase in the country owing to the benefits arising from the FTA. India-UK FTA to further propel India’s luxury car sales growthThe luxury car market in India, despite still holding a minuscule market share in the overall industry pie, is witnessing fast growth. In FY25, while the rising food inflation and falling wages prompted the urban consumers to hold back their car purchase plans, the wealthy class continued their luxury car shopping spree. This resulted in the luxury cars registering strong demand throughout the last fiscal, while the mass-market segment recorded muted sales. The luxury car manufacturers sold 51,406 units in FY25, marking a three per cent year-on-year (YoY) growth compared to 49,862 units in FY24, and setting a record for the highest sales in any financial year. This growth came even as the Indian economy struggled. Mercedes-Benz led the market with 18,928 units sold, marking its best-ever fiscal performance. BMW, on the other hand, secured the second position with 15,810 units sold, recording a five per cent rise from 14,562 units sold in FY24. Jaguar Land Rover (JLR) experienced a 40 per cent YoY growth, selling 6,183 units in the last financial year. Among others, Lexus, the luxury vehicle brand of Japanese automaker Toyota, reported a 19 per cent YoY growth in FY25. While this growth momentum is expected to continue in this financial year, the recently signed India-UK FTA is expected to further fuel this story. Speaking about this, Arun Surendra, Chairman and Group Managing Director at VST Group, a multi-brand luxury car seller, said that the luxury segment is still a small part of India’s overall car market, around one to two per cent, but it’s growing faster than the mass segment. “What’s interesting is how wide the base is getting. It’s no longer just metros. We are seeing solid traction from Tier-2 cities, especially in the SUV and EV space. The aspiration is real, and it’s backed by buying power,” he said, while also adding, “There’s a clear rise in affluence, especially in South India. We are seeing more HNIs (High Net-Worth Individuals) choosing cars that reflect their lifestyle and values. It’s not just about performance anymore. Design, technology, and brand experience are equally important.” India-UK FTA: How ICE cars will benefitUnder the India-UK FTA, internal combustion engine (ICE) powered cars are classified in three segments for duty relief. These are – entry-level vehicles under 1500 cc, mid-segment vehicles between 1500 cc and 3000 cc for petrol or up to 2500 cc for diesel and vehicles with engines larger than 3000 cc for petrol and 2500 cc for diesel. In the first year of FTA, cars in the mid and lower engine segments, which faced a pre-FTA base duty of 66 per cent, will be taxed at 50 per cent in the first year and 10 per cent by the fifth year. Cars in the highest engine capacity segment that attracted a base customs duty of 110 per cent in the pre-FTA regime will see the in-quota duty drop to 30 per cent. By the fifth year, this customs duty rate will come down further to just 10 per cent. There is a clear volume cap for each year under this FTA that will ensure the concessional tariffs apply to a fixed number of cars. In the first year, a total of 20,000 ICE cars from the UK will be allowed into India at discounted rates. This will comprise 5,000 each in the entry-level and mid-level segments, and 10,000 high-end models. These numbers will gradually increase, peaking at 37,000 units in the fifth year, before slowly tapering to 15,000 units annually from the 15th year onward. Any car imports beyond these volumes will still attract reduced out-of-quota tariffs compared to the pre-FTA base rates, but the benefits will be less pronounced. The out-of-quota duties on low-engine and mid-engine cars will stabilise at around 45 per cent and 55 per cent, respectively, by the 10th year. The out-of-quota duties on large-engine cars will reduce from 95 per cent in the first year to 50 per cent by the 10th year. India-UK FTA: How EVs, hybrids and hydrogen cars will benefitUnder the India-UK FTA, electric cars, hybrids, and hydrogen fuel-cell cars are also included, under a separate TRQ (Tariff Rate Quota) structure. However, only cars with a CIF (Cost, Insurance, and Freight) value above 40,000 pounds will receive preferential treatment. Electric cars priced below 40,000 pounds are excluded entirely from any customs duty relief. For cars priced between 40,000 pounds and 80,000 pounds, the duty will drop sharply from the base 110 per cent to 50 per cent in the sixth year of implementation, and further to 10 per cent by the 10th year. The high-end electric cars priced above 80,000 pounds will benefit even more, with the duty reduced to 40 per cent in the sixth year and then to 10 per cent by the tenth year. Starting from the sixth year, 4,400 electric and hybrid cars will be allowed annually at the reduced rates. The quota expands over time, reaching 13,200 units by the 10th year and stabilising at 22,000 units annually from the 15th year. Interestingly, unlike the ICE models, there is no preferential duty on electric cars imported beyond the quota. This means high duties will apply to surplus shipments. Get insights into Upcoming Cars In India, Electric Vehicles, Upcoming Bikes in India and cutting-edge technology transforming the automotive landscape. First Published Date: 03 Aug 2025, 10:42 am IST
Source: hindustantimes.com