India Intends on Cutting EV Import Duties To secure a Free Trade Agreement

By Consultants Review Team Wednesday, 08 November 2023

According to two people involved with the conversations, India is considering lowering import levies on some electric vehicles from the United Kingdom to finalize a free-trade agreement between the two countries before the end of the year.

According to the persons who asked not to be identified since the talks are confidential, New Delhi is mulling a 30% concessional tariff on 2,500 electric vehicles imported annually from the UK valued above $80,000. Currently, India assesses tariffs ranging from 70% to 100% on automobiles imported as fully assembled units, depending on their worth.

One of the remaining outstanding concerns in the free trade discussions is the UK's desire for import concessions on electric vehicles. Prime Minister Rishi Sunak and his Indian counterpart Narendra Modi had intended to finalize the agreement by the end of last month, but a deal is unlikely to be revealed until December, according to Bloomberg News.  The Indian trade ministry did not react quickly to a request for details. Because the talks are still underway, a representative for the UK Trade Department declined to comment.

India has the world's largest population, and demand for electric vehicles is increasing among middle-class and rich purchasers. The expensive cost of the automobiles, a lack of options, and a shortage of charging facilities have all slowed the country's adoption of EVs. Opening up the EV market could help hasten the transition to cleaner transportation in a country with the most polluted air in the world. 

According to BloombergNEF, electric car sales in India totaled 49,800 last year, accounting for only 1.3% of the 3.8 million passenger vehicles sold. Tata Motors Ltd.'s Nexon.ev, the country's best-selling electric car, is priced at less than 1.5 million rupees ($18,000) in India's cost-conscious market. BMW AG, Mercedes-Benz Group AG, and Volkswagen AG's Audi sell electric vehicles in India for more than $80,000. 

The Modi administration is treading carefully on EV imports as it works to establish an indigenous manufacturing industry for electric vehicles and parts. In 2021, the government launched a $3.1 billion production-linked incentive program for domestic EV manufacturers.

According to those involved with the discussions, no final decision on India's position on EV import taxes has been reached.  According to Bloomberg News, India and the United Kingdom have already softened their stance on several topics, including lowering taxes on British cars and scotch whisky. 

The two countries anticipate that the free trade agreement will more than triple bilateral commerce by 2030 due to decreased tariffs and expanded market access. It would also be a political victory for both governments, as the UK-India agreement is considered a crucial prize of Brexit and a method to promote India's industrial goals. Car imports in India are subject to a variety of levies. The tax on unassembled autos imported from overseas ranges from 15% to 35%.


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