New Delhi, Jul 24 (PTI) India has agreed to reduce customs duty on imported British passenger vehicles, including mass market segment products, to 10 per cent in five years within quotas, under a free trade pact inked between the two countries on Thursday.

India, for the first time, has opened its auto sector in a free trade agreement. However, no concessions have been given to electric, hybrid, and hydrogen-powered vehicles in the first five years of the agreement.

India has also not opened its market for vehicles priced below GBP 40,000 (CIF), ensuring complete protection for the mass-market EV segment in which India seeks global leadership.

As per the pact, tariffs on automotive imports will go from about 110 per cent at present to 10 per cent under quotas on both sides. The offered quota and duty reduction are more for the large engine capacity categories (above 3,000 cc petrol / 2,500 cc diesel).

In the up to 1,500 cc segment, the trade deal provides for tariffs to drop from 66 per cent to 10 per cent in the fifth year for a quota of 37,000 units.

"It ensures the domestic sector sufficient time to expand, innovate, and enhance global competitiveness in our area of strength in small (up to 1,500 cc) and mid segment (1,500–3,000 cc petrol / up to 2,500 cc diesel," a commerce ministry official said, adding the duty reduction to 10 per cent will be done in over five years with quota.

Out of quota duty reduction is 50 per cent over 10 years.

"The concession framework is designed to provide market access to UK exporters mostly on large engine size ICE (internal combustion engine) vehicles and high price range EVs while simultaneously protecting sensitive segments of India's automotive industry (mid and small size engine capacity ICE vehicles and mid and low price range EVs)," the official said.

As per the details of the agreement, the number of vehicles from ICE engines shall get deducted by the number of EV vehicles getting concessions in the sixth year onwards to maintain the total quota volume of 37,000 units at the end of 15 years of duty concession.

For vehicles priced below GBP 40,000 (CIF), no market access is provided, ensuring complete protection for the mass-market EV segment in which India seeks global leadership.

Market access in EV is given mostly in high-priced vehicles priced above GBP 80,000 (CIF).

"India has secured market access to the tune of four times of its concession given to the UK on EV in the UK market," the government official said, adding India has extended a structured and balanced market access offer to the UK in the automobile sector under the trade agreement.

India's commitment is calibrated, phased, and development-oriented, quota-based liberalisation strategy.

This offer pertains exclusively to Completely Built Units (CBUs) of passenger vehicles encompassing Internal Combustion Engine (ICE) vehicles as well as electric, hybrid, and hydrogen-powered vehicles.

Commenting on the trade deal, CMS IndusLaw Partner Shashi Mathews said it marks a pivotal moment for the automotive sector, balancing tariff liberalisation with strategic safeguards.

“By lowering import duties on premium UK vehicles and components while preserving phased protections for Indian manufacturers, the FTA signals a mature, forward-looking trade partnership,” he stated.

Indian consumers will see access to quality British vehicles at much lower costs, while Indian manufacturers—especially in auto components and EVs—gain better access to UK markets, Mathews said.

On the trade deal, a spokesperson of British luxury car maker 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." The Automotive Component Manufacturers Association of India (ACMA) said that the trade deal is expected to usher in a new era of economic cooperation, foster greater market access, technology partnerships, and value chain integration between the Indian and British automotive industries.

"The CETA is expected to benefit the Indian auto component sector through enhanced opportunities for exports, streamlined regulatory processes, particularly in key areas such as electric mobility, precision engineering, and lightweight materials," ACMA President Shradha Suri Marwah said in a statement. PTI MSS RR RKL RR MR

Tariff liberalisation on British passenger vehicles: phased, quota-based cuts to 10% with targeted protections for mass-market EVs. The agreement provides quota-based, phased tariff reductions on British passenger vehicle CBUs, lowering tariffs to 10% over five years for eligible categories and applying a 50% out-of-quota reduction over ten years. Larger engine-capacity categories obtain greater quotas; the up-to-1,500 cc segment is allotted a 37,000-unit quota with tariffs falling from 66% to 10% by year five. EV, hybrid, and hydrogen vehicles receive no concessions in the first five years, vehicles below a price threshold receive no market access, and ICE entries will be offset by EV concessions from year six to maintain total quota volume through a 15-year concession term.