India-UK FTA Slashes Auto Tariff To 10% From Over 100% ‘Under A Quota’
India’s auto exports to the UK were valued at $1,878 million in 2023-24.
The signing of the India-UK Free Trade Agreement has wide-ranging implications for the world’s fourth largest automotive industry, as well as “Make in India, for the World”.
According to the India-UK FTA, “automotive tariffs will go from over 100% to 10% under a quota”, according to a statement on the UK government’s website. This includes the crucial auto components industry as well. It wasn’t immediately clear what the quota was.
“Despite India’s strong manufacturing base, its share in the globally traded auto market remains subdued, highlighting a vast scope for expansion,” according to FAQs to the India-UK FTA released on Wednesday. “The duty-free access to the UK market for ICE vehicles has the potential to boost India’s auto and auto components exports.”
The duty-free access to import of internal-combustion vehicles from the UK is limited to a pre-defined quota. The duty-free quota on EVs is limited to only a few thousands with no scope of out-of-quota reduction in tariffs.
“The sensitivity related to EVs has been taken care of,” the FAQ document stated. “Further, the out-of-quota duty on ICE vehicles will be reduced gradually over a longer period of time, thereby helping our industries to absorb the incremental increase of imports from the UK.”
Some stakeholders of India's auto sector welcomed the move immediately.
“This landmark pact opens a new chapter for bilateral trade and investment, and is a significant step toward deepening economic ties between the two nations,” Shradha Suri Marwah, president of Automotive Component Manufacturers Association of India, said in a statement. She is also the chairperson and managing director of Subros Ltd.
“The Indian auto components industry looks forward to enhanced cooperation, technology partnerships, and market access through this milestone agreement.’’
TVS Motor Co., which owns Norton Motorcycles, echoed the sentiment.
“We applaud our prime minister’s vision to enhance India’s trade links globally. It (India-UK FTA) creates large opportunities for Indian companies like ours to expand further and access new markets,” TVS Motor MD Sudarshan Venu said. “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.”
Tariffs imposed on UK’s auto exports to India averaged 59% and rose to as much as 125% in 2019. It is estimated that annual duties on UK exports of vehicles and vehicle parts was £49 million in 2019. India’s auto exports to the UK were valued at $1,878 million in 2023-24.
The revised tariff regime works to the advantage of luxury carmakers Rolls-Royce, BMW Group’s Mini Cooper and Aston Martin, though their volumes are yet small in India. A key winner is Jaguar Land Rover, the British unit of India’s Tata Motors Ltd.
“(The UK-India FTA) is good for India’s automotive sector, especially Tata Motors and Mahindra due to reduced tariff on auto components, including EV parts. JLR will benefit,” Ravi Bhatia, president and director at JATO Dynamics India, told NDTV Profit.
He, however, had a word of caution as well.
“Indian firms will face increased competition from UK imports, while UK manufacturers must navigate strict ‘Rules of Origin’,” he said.
When contacted, a Tata Motors spokesperson said the company would first study the fineprint before offering its views. Comments from India’s largest carmaker Maruti Suzuki India Ltd., as well as Mahindra & Mahindra Ltd. and Hyundai Motor India Pvt. are awaited.
