India-UK FTA: UK car duties to 10% from 2026

Deal start date and why it matters

India and the United Kingdom have fixed July 15, 2026 as the implementation date for the Comprehensive Economic and Trade Agreement (CETA). A key focus of the published schedules is automobiles, where market access is being opened through tariff-rate quotas (TRQs), price segmentation, and phased duty reductions rather than immediate full liberalisation. The agreement creates a clear pathway for cheaper UK passenger vehicle imports into India over time, while also giving Indian manufacturers a structured route to expand exports of electric, hybrid and hydrogen passenger cars to the UK. The official documents set out specific quota ceilings, duty rates, and timelines. The structure matters because both sides have kept protections in place through caps and staggered schedules, even while announcing steep headline tariff cuts.

UK passenger vehicles: quota-based access into India

Under the CETA schedule on passenger vehicles, India will allow import of up to 3.78 lakh UK-made passenger vehicles over a 15-year implementation period. The document describes distribution through engine-wise quotas and staggered tariff phases. The headline change is the reduction in customs duties from around 110 percent to 10 percent, but this applies within the quota system and over time. The implementation design limits the pace of import expansion in early years while setting a long-term ceiling for in-quota tariffs. Out-of-quota imports continue to attract significantly higher tariffs, depending on vehicle size and year.

How duties fall: from high tariffs to a 10% ceiling

The schedules indicate that tariffs for certain segments are reduced from about 66 percent to 50 percent initially, and then converge to a long-term ceiling of 10 percent by the fifth year. Another part of the published material summarises the broader policy shift as a move from over 100 percent tariff rates to 10 percent under a quota system. This is a marked shift from current baseline tariffs for imported UK cars, but it is paired with volume caps that shape the real-world impact. The agreement also ties duty cuts to defined vehicle categories, with different treatment based on engine size and other parameters.

Volume ramp-up: what the documents project

Import volumes are projected to scale up to around 37,000 units by year five under the TRQ approach. From year 15 onward, the schedule describes imports stabilising at 15,000 units annually. A separate TRQ description notes that by year five, up to 37,000 UK-built internal combustion engine (ICE) vehicles could enter India annually at 10 percent duty, compared with a current base rate cited at 110 percent. The staggered volumes reflect a managed opening rather than a one-time cut.

Engine-size segmentation for UK ICE cars

The FTA text outlines specific categories for petrol and diesel vehicles. For large-engine petrol cars above 3000 cc and diesel cars over 2500 cc, India commits to lowering current 100 percent customs duty to 10 percent in a phased manner over 15 years, within a quota that starts at 10,000 units and rises to 19,000 units over five years. For mid-sized cars (1500-2500 cc diesel or up to 3000 cc petrol), an in-quota duty of 50 percent applies initially, falling to 10 percent by year five. Small cars under 1500 cc follow a similar reduction path alongside a growing quota. The documents also note that out-of-quota imports still face tariffs ranging from 95 percent to 50 percent, depending on vehicle size and year.

Electric, hybrid and hydrogen cars: India’s import stance

For UK electric, hybrid and hydrogen passenger vehicles, the documents make clear there is no immediate tariff relief for models priced below GBP 40,000 on a CIF basis. These categories remain subject to full import duties for at least the first five years after the deal takes effect. Concessions begin from the sixth year for specific price slabs. From year six, vehicles priced GBP 40,000 to GBP 80,000 CIF (inclusive) see duties reduced to 50 percent with a quota of 400 units, while vehicles priced above GBP 80,000 CIF see duties lowered to 40 percent with an import limit of 4,000 units. In the tenth year, customs duty is described as stabilising at 10 percent for the two price segments of electric, hybrid and hydrogen passenger cars.

India’s export win: duty-free access to the UK from year 6

On the export side, India gets access to the UK’s electric, hybrid and hydrogen passenger cars segment with duty-free exports from the sixth year in the GBP 20,000 to GBP 80,000 price band. The documents also state that made-in-India EVs, hybrids and hydrogen-powered vehicles will be eligible for import into the UK free of customs duty from January 1 of the sixth year, where the current UK customs duty is cited at 10 percent. The benefit is provided under a TRQ system rather than unlimited access. One section of the material states that 17,600 vehicles will be eligible from the sixth year, while another reference puts the starting quota at 17,800 vehicles. Over time, the quota is set to rise steadily to 88,000 units annually by the fifteenth year.

Key exclusions and product coverage beyond autos

The documents state that two-wheelers, electric buses and trucks are excluded from the agreement’s tariff concessions. Beyond automobiles, CETA is described as providing duty-free access to 99 percent of India’s exports to the UK, covering nearly 100 percent of the trade value. The text lists labour-intensive sectors such as textiles, leather, marine products, gems and jewellery, and toys, alongside engineering goods, chemicals, and auto components. It also mentions strategic exclusions covering items such as critical energy, fuels, marine vessels, some polymers, worn clothing, smart phones and optic fibres. For products where domestic capacity is being built under initiatives such as Make in India or PLI, the documents describe gradual tariff reduction over 5, 7 or 10 years.

Summary table: milestones, duties and quotas

Market impact: what the structure implies for stakeholders

For Indian consumers, the most direct channel is the TRQ-based inflow of UK passenger vehicles with materially lower in-quota duties over time, including a pathway to 10 percent duty for certain segments by year five. For Indian automakers, the export provisions are notable because they specify duty-free access to the UK for alternative-fuel passenger vehicles from year six, paired with a steadily expanding quota that reaches 88,000 units a year by year 15. At the same time, the agreement keeps safeguards through caps, price slabs, and exclusions, particularly for lower-priced EVs on the import side into India during the first five years. For the broader auto supply chain, the agreement’s broader tariff elimination coverage on items including auto components and engines is also referenced in the documents as part of the wider export opportunity set.

Conclusion

CETA’s published schedules show an automotive opening built around TRQs, phased duty cuts and price-based segmentation, with implementation starting July 15, 2026. India will allow up to 3.78 lakh UK passenger vehicles over 15 years with a pathway to 10 percent in-quota duties, while Indian EV, hybrid and hydrogen passenger cars get duty-free access to the UK from year six under expanding quotas. The next major marker in the timeline is the start of the sixth year of the agreement, when export benefits and the first EV-linked concessions begin to apply under the documented quota limits.