JLR, Stellantis, TVS Motor to benefit from India-UK FTA

The India-UK free trade agreement is poised to present a significant boost to the domestic automobile industry, especially in terms of premiumisation. This comes at a time when the domestic automobile industry is facing uncertainty owing to 25% tariffs by the US.
 
While the text of the deal is still under wraps, an official statement by the Indian government says that the deal opens up massive export opportunities for labour-intensive industries and key sectors such as engineering goods, auto parts and engines, and organic chemicals.
 
Under the FTA, the import duty for auto parts will become zero. Under the newly signed UK-India Free Trade Agreement (FTA), India has agreed to significantly reduce import tariffs on British automobiles. Currently, these tariffs can be as high as 100%, but they will be gradually lowered to 10%.
 
According to Kumar Rakesh, analyst-IT and auto at BNP Paribas, the FTA is likely to increase more premium models in India. “Given that most of the beneficiaries are premium/luxury OEMs, we do not see any material impact on India-listed passenger vehicle OEMs. That said, we could see a slightly higher number of premium/luxury vehicles selling in India, which are currently minuscule,” says Rakesh. 
 
In CY2024, India imported cars valued at approximately ₹650 crore from the UK. Luxury brands such as Mercedes-Benz, Jaguar Land Rover (JLR), BMW, Rolls-Royce, Aston Martin, and Bentley were the primary contributors, collectively accounting for over ₹500 crore of these imports. The import value for motorcycles stood at around ₹30 crore. Indian manufacturers imported auto parts worth ₹1,150 crore from the UK, reflecting ongoing reliance on British components for domestic vehicle production.
 
Saurabh Agarwal, Partner & Automotive Tax Leader, EY India, says that the deal is likely to increase auto component exports to the UK as well as import of premium models. “This deal should really help our auto component makers sell more in the United Kingdom. At the same time, Indian consumers might be able to buy premium cars at the right price point as soon as they are launched globally. It probably won't shake up our Indian car manufacturers too much because most Indian consumers still prefer the more affordable options. What this agreement really shows is that the government wants to create a level playing field, which is good news for all Indian consumers in the long run. This could also set a precedent for more such deals down the line,” says Agarwal. 
 
In the passenger vehicle segment, Tata Motors-owned Jaguar Land Rover is likely the biggest beneficiary of the FTA. “Most automotive manufacturing plants in the UK are of premium and luxury brands, such as Bentley, BMW, Rolls-Royce, and Aston Martin. While among them, JLR could be a key beneficiary, we note that one of its key models, the Defender, is not manufactured in the UK. Also, JLR already uses its India-based assembly plant for several models to enjoy the lower duty,” notes Rakesh. 
 
Mahindra & Mahindra, the country’s largest SUV manufacturer, is also likely to benefit as it plans to export its born electric vehicles to the right-hand market like the UK. “We do have a plan to go to the EU with our electric vehicles at some point in the future, but that will be in a calibrated way. We will do right-hand-drive EVs first and then move to left-hand-drive. So, we are a while away, and of course, based on what gets negotiated through the EU agreement, it will facilitate us to Make in India for the world,” said Rajesh Jejurikar, ED & CEO- Auto & Farm at Mahindra & Mahindra, in a recent press conference.

Meanwhile, amongst the mass-market players, Stellantis could bring more models under its some models that it manufactures, under brands such as Vauxhall, Peugeot, and Citroën, to India, according to Rakesh. 
 
In the two-wheeler segment, one of the key beneficiaries in the two-wheeler segment would be TVS Motor, which plans to bring the iconic British motorcycle brand in India this year. 
Exports of motorcycles amounted to ₹50 crore, indicating a growing interest in Indian two-wheelers among UK consumers.
 
“We appreciate the effort taken by the government to make this historic India-UK Free Trade Agreement. Our British brand Norton will launch later this year, and this agreement will help us scale faster and leverage common supply chains,” says Sudarshan Venu, Managing Director, TVS Motor.