India and the United Kingdom are set to implement their Free Trade Agreement (FTA) on July 15, opening the door to lower import duties on vehicles traded between the two countries and creating new opportunities for automakers over the coming decade.
While tariff reductions for conventional internal combustion engine (ICE) vehicles will begin immediately, hybrid, battery-electric, and hydrogen-powered vehicles will receive preferential treatment only from the sixth year of the agreement, reflecting India’s efforts to protect domestic automotive manufacturing.
Tariff Cuts Begin With Conventional Vehicles
Under the agreement, India will gradually reduce customs duties on UK-built ICE vehicles from current levels of up to 110% to 10% over a five-year period.
The tariff reduction will be implemented in stages, beginning at 30% in the first year before falling to 10% across all engine sizes and fuel types by the fifth year.
India has established a quota of 378,000 ICE vehicle imports over the first 15 years of the agreement, with annual limits ranging from 15,000 to 37,000 units.
For imports exceeding those quotas, customs duties will still be reduced, though at a slower pace, declining to as low as 45% over a ten-year period.
Electrified Vehicles Face Delayed Benefits
India will not begin lowering tariffs on hybrid, electric, and hydrogen-powered vehicles until the sixth year after the agreement enters into force, which is expected to be 2031.
The government has introduced a quota-based system aimed at encouraging imports of premium electrified vehicles while shielding lower-priced domestic segments from increased competition.
Over a ten-year period, India will permit up to 137,500 hybrid, electric, and hydrogen vehicles to enter the market under reduced tariff rates, with annual quotas ranging from 4,400 to 22,000 units.
Premium EVs Receive Preferential Access
To qualify for reduced duties, electrified vehicles must meet minimum import value requirements.
India will not offer tariff concessions on vehicles with a Cost, Insurance and Freight (CIF) value below £40,000.
For hybrid, electric, and hydrogen vehicles valued between £40,000 and £80,000, customs duties will fall from 110% to 50% in the sixth year of the agreement and gradually decline to 10% by the tenth year.
Vehicles valued above £80,000, including premium luxury models, will see tariffs reduced from 110% to 40% in the sixth year before reaching 10% by year ten.
The framework is expected to benefit higher-end imported models while preserving protection for India’s mass-market vehicle manufacturers.
No Preferential Rates Beyond EV Quotas
Unlike ICE vehicles, electrified vehicles imported beyond the agreed quota will not receive reduced out-of-quota tariff rates.
Instead, imports exceeding the 137,500-unit quota will continue to face India’s standard customs duties, which currently reach up to 110%.
This approach limits the overall volume of lower-tariff imported electric and hybrid vehicles entering the Indian market.
UK Opens Market to Indian-Made Low-Emission Vehicles
The agreement also provides tariff benefits for Indian vehicle exports to the United Kingdom.
Beginning in the sixth year of the FTA, the UK will eliminate customs duties on qualifying hybrid, electric, and hydrogen-powered vehicles imported from India, subject to annual quotas ranging from 17,600 to 88,000 units.
Over ten years, the UK will allow up to 550,000 electrified vehicles from India to enter tariff-free.
The allocation includes 212,500 vehicles each in the under-£20,000 and £20,000-to-£40,000 price categories, as well as 125,000 vehicles priced between £40,000 and £80,000.
The UK has excluded vehicles valued above £80,000 from the preferential tariff arrangement.
Trade Deal Could Influence Future EV Investment
The agreement is expected to reshape trade flows between the two automotive markets, particularly in the premium electric vehicle segment.
For UK manufacturers, the gradual reduction of India’s high import duties could improve access to one of the world’s fastest-growing vehicle markets. Meanwhile, Indian automakers may gain greater opportunities to export electrified vehicles to the UK as domestic production capacity expands.
The phased structure of the agreement also reflects a balancing act between promoting international trade and protecting domestic automotive industries as both countries accelerate the transition toward lower-emission mobility.