India has notified the process for importing vehicles from the UK at lower duties under a new trade pact starting July 15. The policy allows specific quotas for passenger and goods vehicles while maintaining high import barriers for cheaper models to protect domestic manufacturers. Investors should watch how this shifts competition in the premium car segment.
The Directorate General of Foreign Trade (DGFT) has officially set the guidelines for importers seeking tax benefits on vehicles brought into India from the United Kingdom. This framework, effective July 15, is part of the broader trade agreement between the two nations and aims to balance market access with domestic industrial protection.
Access and Eligibility for Tariff Quotas
Under the new rules, only Original Equipment Manufacturers (OEMs) or their authorized Indian dealers can apply for these tariff rate quotas. Importers must provide a valid Certificate of Origin from UK authorities along with a pre-purchase agreement from the UK-based manufacturer. The DGFT will manage the allocation process strictly; once the annual quota limit for a specific vehicle category is met, no further concessions will be granted for that period. These certificates remain valid for up to 12 months or until the end of the calendar year.
Duty Structures and Vehicle Categories
Import duties on conventional engine vehicles are set to drop significantly, moving from current levels of around 110% down to 10% over a 15-year period. The reduction is phased, with different engine capacities receiving varying levels of relief. For instance, in the first year, cars with larger engines—those exceeding 3,000 cc for petrol and 2,500 cc for diesel—will see their duty cut to 30%. Smaller engines, including the mass-market segment under 1,500 cc, will see duties reduced to 50% for a set quantity of units.
Protecting Domestic Interests
The government has included specific safeguards to prevent disruption to India’s local automotive industry, particularly in the electric vehicle (EV) space. For the first five years of the agreement, passenger vehicles priced below 40,000 GBP (cost, insurance, and freight value) are excluded from these duty cuts. This design ensures that companies like Tata Motors, Mahindra & Mahindra, and Maruti Suzuki, which have significant investments in the Indian market, face limited competition in the affordable segment from imported UK-manufactured cars.
From the sixth year onwards, the agreement allows for limited duty concessions on higher-end electric, hybrid, and hydrogen-powered vehicles priced above 40,000 GBP. By phasing in these concessions and targeting higher-priced segments, the policy seeks to encourage the availability of premium international models without undermining the domestic growth of the EV sector. The key monitorable for investors will be how demand for these premium imported vehicles evolves and whether this competition puts pressure on the margins of luxury segments served by domestic or global players already manufacturing within India.