The landmark Free Trade Agreement between India and the United Kingdom, signed recently, is set to transform the automotive industry. It is expected to bring a host of benefits for both manufacturers and consumers. Among the most impactful measures is the reduction in tariffs on automotive imports, dropping from over 100% to just 10% under a quota system, as outlined in a statement on the UK government's official website. This move is expected to make luxury British cars more affordable for Indian buyers while also opening up new avenues for Indian automakers in the UK.
The FTA introduces a structured quota system for tariff reductions, starting with internal combustion engine vehicles before extending to electric vehicles and hybrids. However, the exact size of the quota has not yet been disclosed. The agreement allows for duty-free imports of ICE vehicles from the UK under specific quotas, providing Indian consumers with greater access to premium brands like Jaguar Land Rover (JLR), Rolls-Royce, and Aston Martin.
The trade agreement is expected to have a ripple effect on India's automotive exports as well. With the UK market now more accessible, Indian automakers are likely to find new opportunities for growth in both the auto and auto components sectors. TVS Motor Company, which owns the British brand Norton, sees this as a chance to expand its presence in the UK. Speaking to PTI, TVS Motor Company MD Sudarshan Venu expressed optimism, stating that the FTA would enable Norton to "scale faster" in global markets.
The deal comes at a time when India's EV market is on a growth trajectory. According to the Federation of Automotive Dealers Association, electric passenger vehicle sales in India surged by 56.87% in April 2025, climbing to 12,233 units compared to 7,798 units during the same period last year. This momentum is expected to accelerate further with the entry of more British-made electric cars at competitive prices.
India’s decision to slash tariffs on UK-made cars and whiskey as part of a sweeping trade pact could create a line of winners, including Jaguar Land Rover and Diageo Plc. The Free Trade Agreement, announced on May 6, 2025, after three years of negotiations, will make it cheaper for UK firms to sell their whiskeys, cars, auto parts, cosmetics, biscuits, clothes, and electrical machinery in the world’s most populous nation. Indian exporters to the UK will benefit from lower levies on 99% of products and services.
Bilateral commerce is expected to nearly double in a few years from $21 billion in the year ended March 2024, according to DBS Bank Ltd. Economist Radhika Rao. As exporters and companies await the fine print of the deal, it’s clear that the automotive sector stands to gain significantly.
Reduced tariffs on cars will start with fossil fuels-fed vehicles and eventually extend to electric and hybrid vehicles over a 10-year timeline. Beneficiaries may include JLR and other luxury brands with factories in the UK such as Bentley, Aston Martin, Vauxhall, and Mini. However, domestic carmakers like Mahindra & Mahindra Ltd. and Maruti Suzuki India Ltd., which have invested in EVs, may feel the pinch.
Whiskey and gin tariffs will be halved to 75% before settling at 40% by the 10th year of the deal. In 2022, India imported over £200 million ($266 million) worth of whiskey from the UK, paying duty at the rate of 150%. Diageo, which makes Johnnie Walker whiskey and Tanqueray gin, may gain from this. Shares of its Indian unit, United Spirits Ltd., jumped as much as 2.8% on May 7, 2025. The treaty will enable "improved accessibility and choice of scotch for the Indian consumers" in the world’s largest whiskey market, according to Praveen Someshwar, managing director at Diageo India.
Clothes are the second-largest export to the UK from India, with the South Asian nation shipping £900 million worth of goods in 2024. The removal of tariffs will enhance India’s competitiveness against countries like Bangladesh and Vietnam. Apparel retailers such as Marks and Spencers and Primark are expected to shift sourcing to India from Bangladesh after this deal, according to P Senthilkumar, a partner at Vector Consulting.
As the final contours of the trade deal unfold, it is clear that while British luxury brands stand to gain first, Indian players are laying the groundwork for a more assertive global presence, especially in the electric mobility space. Tata Motors is preparing to launch its premium electric brand, Avinya, in 2026, the same year the FTA is expected to take effect. Avinya will sit above Tata’s current range but below JLR, targeting discerning global buyers with a platform co-developed with JLR.
Meanwhile, Maruti Suzuki is gearing up to manufacture its electric SUV, the e-Vitara, exclusively in Gujarat for overseas markets, including the UK. Mahindra is also planning to take its newly unveiled BE 6 and XUV 9e to Europe, starting with right-hand drive variants suitable for the UK market. Rajesh Jejurikar, executive director and CEO of automotive and farm equipment sectors at M&M, stated, "We do have a plan to go to the European Union with our electric vehicles, but that will be in a calibrated way. We will do right-hand drive EVs first before moving to left-hand drive."
Beyond complete vehicles, the deal is also expected to boost exports and R&D collaborations in the auto components sector. Industry leaders believe the FTA will not only increase trade volumes but also create synergies in innovation and supply chain integration between the two countries. BMW Group supports free market access and reduction of trade barriers, seeing it as a win-win situation for overall economic growth and benefits for consumers.
As this agreement takes shape, it’s clear that the automotive landscape in India is on the verge of a significant transformation. The FTA not only opens doors for luxury British cars but also sets the stage for Indian manufacturers to carve out a niche in the global market, particularly in the electric vehicle sector. The coming years will likely reveal the full impact of this groundbreaking trade pact.
