India protects mass-market ICE, EVs; offers selective auto access to UK under CETA

Offering selective market access to the UK in the automobile sector under the trade agreement (CETA), India has protected its sensitive segments —mid-and small-sized engine capacity ICE vehicles, as well as mid-and low-price range EVs, according to government sources.

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

Market access for EVs is also given mostly in the high-priced segment—vehicles priced above £80,000 (CIF)—securing access at a rate four times the concession given to the UK for EVs in its own market, sources add.

Concessions mostly on large-engine ICE vehicles and high-end EVs

The concession pertains "exclusively" to completely built units (CBUs) of passenger vehicles (PVs), encompassing internal combustion engine (ICE) vehicles, as well as electric, hybrid, and hydrogen-powered vehicles. "The concession framework is designed to provide market access to UK exporters mostly for large-engine-sized ICE vehicles and high-price-range EVs, while simultaneously protecting sensitive segments of India’s automotive industry (mid- and small-sized engine capacity ICE vehicles and mid- and low-price-range EVs)."

The sources add that the offered quota and duty reduction are primarily for the "large engine capacity categories" (above 3,000 cc petrol/2,500 cc diesel). The aim is to ensure the domestic sector gets sufficient time to expand, innovate, and enhance global competitiveness in its areas of strength: small (up to 1,500 cc) and mid-segment (1,500–3,000 cc petrol/up to 2,500 cc diesel).

"The duty reduction to 10% over five years is only in-quota. Out of quota, the duty reduction is 50% over ten years. There are no concessions given to electric, hybrid, and hydrogen-powered vehicles in the first five years."

As per the agreement, the number of ICE vehicles receiving concessions will be reduced by the number of EV vehicles receiving concessions from the sixth year onwards, to maintain a total quota volume of 37,000 units at the end of 15 years of duty concessions.

Pratik Shah, Partner, EY-Parthenon, says the India-UK Free Trade Agreement is a "strategic milestone" for the automotive sector reducing import tariffs on UK vehicles from over 100% to 10% within quota limits, while ensuring 99% duty-free access for Indian exports. "With a growing base of auto component & vehicle exports from India, the agreement sets the stage for stronger bilateral trade, deeper supply chain integration, increase jobs and investment flows. While there are few concerns around backdoor Chinese imports & Uks CBAM levies, long-term success hinges on balancing collaboration with protecting local innovation."

India and the United Kingdom signed a historic economic partnership agreement today, which aims to double the bilateral trade between the two countries from USD 56 billion currently. CETA secures unprecedented duty-free access for 99% of India’s exports to the UK, covering nearly the entire trade basket. This is expected to open new opportunities for labour-intensive industries such as textiles, marine products, leather, footwear, sports goods, toys, and gems and jewellery, alongside fast-growing sectors like engineering goods, auto components, and organic chemicals.