India-UK CETA: Here's How the Auto Sector will Benefit and Ultimately, the Consumer
India and the UK finalized the Comprehensive Economic and Trade Agreement (CETA) on July 24, 2025, after extensive negotiations. The deal allows duty-free access for 99% of Indian exports to the UK, covering various sectors, including textiles and automobiles. It also simplifies mobility for Indian professionals and includes significant tariff reductions on UK vehicles entering India. Industry leaders view the agreement as a vital step towards enhancing trade relations and fostering growth, particularly in the automotive and manufacturing sectors, benefiting numerous stakeholders.
India-UK Sign FTA: Auto Sector to Benefit from Major Tariff Cuts
India and the UK signed the Comprehensive Economic and Trade Agreement (CETA) On July 24, 2025, concluding over a decade of negotiations. The agreement was signed in the presence of Indian Prime Minister Narendra Modi and UK Prime Minister Keir Starmer. Key signatories included Commerce and Industry Minister Piyush Goyal and the UK Secretary of State for Business and Trade, Jonathan Reynolds.
Q/A is AI-generated, newsroom-reviewed How will the India-UK Free Trade Agreement impact the pricing of luxury vehicles in India?The India-UK Free Trade Agreement is set to significantly reduce import duties on luxury vehicles from the UK, cutting tariffs from over 100% to as low as 10%. This reduction is expected to make premium brands like Rolls-Royce and Jaguar Land Rover more accessible to Indian consumers, potentially increasing their market share in India. The overall impact on pricing will depend on various factors including logistics and dealer margins.
What role does the Indian automotive component industry play in the context of the new trade agreement?The Indian automotive component industry is expected to benefit from the trade agreement as it eliminates tariffs on many components exported to the UK. This move is anticipated to enhance India's position as a global supplier of auto parts, thereby supporting the government's goal of reaching $100 billion in exports by 2030. The agreement also opens doors for Indian manufacturers to tap into the UK market more effectively.
How do the recent tariff changes impact the electric vehicle (EV) market in India?The recent tariff reductions under the India-UK Free Trade Agreement are expected to boost the EV market by allowing easier access for Indian EV manufacturers to the UK. Additionally, the agreement includes provisions for quota-based access for Indian EV models in the UK, which could encourage more investment and innovation in the sector, aligning with India's goal of becoming a leader in electric mobility.
What potential challenges could the Indian automotive industry face due to the trade agreement?While the trade agreement offers numerous benefits, the Indian automotive industry may face challenges such as increased competition from UK manufacturers, particularly in the luxury vehicle segment. Additionally, the phased quota system for internal combustion engine vehicles could create uncertainties for manufacturers as they adapt to new market conditions and consumer preferences shifting towards EVs.
How does the India-UK Free Trade Agreement align with India's broader economic goals?The India-UK Free Trade Agreement aligns with India's broader economic goals by supporting the 'Make in India' initiative and fostering an environment for increased foreign investment. It aims to double bilateral trade by 2030, enhance manufacturing capabilities, and create jobs. The agreement also emphasizes sustainable practices, which resonate with India's ambitions to transition towards a greener economy.
The agreement provides duty-free access to 99% of Indian exports to the UK. This includes a wide range of goods from traditional sectors such as textiles and leather to modern industries like engineering and auto components. India’s auto parts and chemical exports are also expected to gain from simplified market entry.
Comprehensive Economic and Trade Agreement (CETA) signing
Piyush Goyal, Union Minister for Commerce and Industry, said, “This CETA marks a milestone in the trade relations between two major economies, setting an ambitious and balanced framework. It unlocks tariff-free access on 99% of Indian exports to the UK, covering nearly 100% of trade value- including labour-intensive sectors advancing the ‘Make in India’ initiative and setting the stage for bilateral trade to double by 2030. It includes ambitious commitments in goods and services, covering various sectors, while enhancing mobility for Indian professionals by simplifying access for contractual service providers, business visitors, and independent professionals. The innovative Double Contribution Convention will exempt Indian workers and their employers from UK social security contributions for three years, boosting competitiveness and earnings. This FTA will serve as a catalyst for inclusive growth, benefiting farmers, artisans, workers, MSMEs, startups and innovators while safeguarding India’s core interests and accelerating our journey towards becoming a global economic powerhouse.”
Tariff Reductions on Automotive Imports
One of the major highlights is the reduction in customs duties for UK-made vehicles entering India. For vehicles priced above USD 40,000, the duty will be cut from 110% to 50%. For vehicles below that value, the rate will reduce from 70% to 10%, subject to certain conditions and quotas. A phased quota system will apply, starting with internal combustion engine vehicles and later expanding to include hybrids and EVs.
JLR spokesperson, said, "A spokesperson for JLR said: “We welcome this free trade agreement between the UK and India, which over time will deliver reduced tariff access to the Indian car market for JLR's luxury vehicles. India is an important market for our British built products and represents significant future growth opportunities.”
Anish Shah, Group CEO and MD, Mahindra Group, said, “The landmark trade agreement between India and the UK marks a transformative moment in the global economic landscape. It’s not just a win for trade, but a blueprint for a modern, values-led partnership that puts innovation, sustainability, and inclusive growth at the heart of global collaboration. The UK-India Vision 2035 aligns closely with our own strategic priorities building resilient supply chains, investing in frontier technologies, and fostering a just transition to a low-carbon economy. As Indian industry becomes increasingly global in its footprint and ambition, we look forward to contributing meaningfully to this next chapter of UK-India cooperation."
Narayan Subramaniam, CEO and Co-Founder at Ultraviolette Automotive, said, “Today’s signing of the India-UK Free Trade Agreement is a landmark moment, not just for the two nations, but for innovators like Ultraviolette. With UK tariffs on Indian automotive components eliminated and finished-vehicle duties slashed to 10% under quota, this opens an exciting new chapter for performance electric mobility. We recently launched our flagship F77 MACH 2 and SuperStreet models across key European markets and in the UK. This FTA has delivered the critical policy support that can transform our aspirations into a sustainable growth story.”
Sudarshan Venu, Managing Director, TVS Motor Company said “We are deeply inspired by Prime Minister Narendra Modi’s vision of Viksit Bharat and his unwavering commitment to making India a global manufacturing and design powerhouse. The signing of the India-UK Free Trade Agreement is a pivotal moment—it opens new frontiers for Indian companies to take ‘Make in India’ to the world. We are particularly excited given the launch of new Norton vehicles this year, which will benefit from the strengthening of trade links between India and the UK. It energises our global ambitions and strengthens our resolve to build world-class products and brands.”
According to the India Automotive Report – May 2025 by BNP Paribas, the immediate impact of the India-UK trade agreement on India’s vehicle market is likely to be limited. In 2024, India imported just 60 passenger vehicles from the UK, valued at around USD 2.75 million. Most car production in the UK supports luxury brands such as Bentley, Rolls-Royce, Aston Martin and BMW. Jaguar Land Rover (JLR) may see some gains, although certain models like the Defender are not built in the UK.
