India-UK auto deal to bring lower tariffs for 3.78 lakh imported cars over 15-year period

India’s newly announced trade agreement with the UK will gradually lower import duties on 3.78 lakh passenger cars over a 15-year period, introducing a structured quota system while maintaining protection for India's mass-market electric vehicle space. The agreement is scheduled to take effect from July 15 and marks a significant shift in automotive trade rules between the two countries.

Under the India-UK Comprehensive Economic and Trade Agreement (CETA), automotive tariffs that currently reach around 110 per cent will eventually reduce to 10 per cent under specified quota limits. The agreement permits imports of conventional internal-combustion passenger cars in multiple engine-size categories. During the first year, India will allow a total of 20,000 imported vehicles under concessional duty rates.

Duty cuts to be phased in

The largest allocation initially applies to vehicles with petrol engines exceeding 3,000 cc and diesel engines above 2,500 cc. This category receives a quota of 10,000 units, while import duty falls to 30 per cent from 110 per cent.

Cars in the 1,500 cc petrol to 3,000 cc petrol and up to 2,500 cc diesel range will receive a quota of 5,000 units at a reduced duty of 50 per cent. A similar 5,000-unit allocation also applies to vehicles with engines up to 1,500 cc.

Quotas increase before stabilising

Import volumes will rise over the initial years of implementation. By the fifth year, total quota allocation for conventional-engine passenger vehicles reaches 37,000 units.

Within that allocation, vehicles in the largest engine category will account for 19,000 units. The middle segment receives a quota of 9,000 units, while vehicles with engines up to 1,500 cc will continue under specified concessional duty provisions.

From the fifteenth year onward, annual import volumes under the arrangement will stabilise at 15,000 units with customs duty fixed at 10 per cent across categories.

EV segment remains protected

India has excluded imported electric vehicles priced below GBP 40,000 (CIF) from any concessions under the agreement. The move preserves protection for the domestic mass-market EV sector where manufacturers such as Tata Motors Passenger Vehicles, Mahindra & Mahindra and Maruti Suzuki continue expanding operations. No tariff concessions for electric, hybrid or hydrogen passenger vehicles will apply during the first five years of the agreement.

Beginning in year six, imported electrified vehicles priced between GBP 40,000 and GBP 80,000 (CIF) will face 50 per cent customs duty under a quota of 400 units, while vehicles priced above GBP 80,000 will be allowed under a 4,000-unit limit at 40 per cent duty. By year ten, duties for both categories will settle at 10 per cent.

The agreement also creates export opportunities for Indian manufacturers, with duty-free access to parts of the UK’s electric and hybrid passenger vehicle market from the sixth year.

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