Luxury Automakers BMW, Mercedes-Benz Welcome India-UK FTA, Say Price Cuts Unlikely In India

Signed last week, the trade pact is expected to enhance bilateral trade by slashing tariffs on 99 per cent of Indian exports and simplifying access for UK products, including automobiles into India.

Despite the scale of the agreement, the luxury auto segment in India is expected to see only a limited effect due to existing market conditions and structural limitations.

Source : BMW

The recently concluded India-UK Free Trade Agreement (FTA) has been hailed as a progressive move by German automotive giants Mercedes-Benz and BMW. However, both companies have clarified that the landmark deal is unlikely to significantly impact the pricing of luxury vehicles in the Indian market.

Signed last week, the trade pact is expected to enhance bilateral trade by slashing tariffs on 99 per cent of Indian exports and simplifying access for UK products, including automobiles and whisky, into India. The broader goal is to double two-way trade between the two countries to $120 billion by 2030, up from the current $60 billion, reported PTI.

Despite the scale of the agreement, the luxury auto segment in India is expected to see only a limited effect due to existing market conditions and structural limitations.

Limited Duty Concessions and Existing CKD Framework

One of the key elements of the pact is a gradual reduction in import duties on vehicles over a 10 to 15-year period. Importantly, the duty relaxation for petrol and diesel cars is confined to a specific quota, which automatically limits the volume of vehicles that could benefit from the concessions.

Mercedes-Benz India MD and CEO Santosh Iyer welcomed the development, saying, “Fundamentally, we have always advocated free trade as a multinational company, because we feel that free trade helps in better growth... So I think for us, definitely it's a real welcome move, because it helps.”

Still, Iyer cautioned against expectations of major price corrections. “Around 95 per cent of the cars we (industry) sell in India are all CKDs. Which means hardly 15-16 per cent duty even today. So to expect a huge price correction, I don't think it would happen even with an FTA,” he noted. He also pointed out that the quota-based approach further restricts the possibility of a broad-based price reduction across the luxury segment.

BMW Sees Broader Economic Gains, Awaits More Clarity

BMW Group India echoed similar sentiments, supporting the principles of open trade while tempering expectations around immediate market shifts. BMW Group India President and CEO Vikram Pawah described the India-UK FTA as a pivotal agreement that touches on various aspects of trade and mobility.

“India-UK FTA seems to be a landmark deal covering various aspects of mutual trade in goods, services, and mobility and will contribute to the greater vision of Viksit Bharat,” Pawah said. He added, “The automaker supports free market access and reduction of trade barriers as it's a win-win situation for overall economic growth and benefits the consumers.”

However, Pawah emphasised that the real impact on India’s luxury auto sector would become apparent only after greater clarity emerges on the detailed provisions of the agreement. He also reaffirmed the company’s strategic focus on local manufacturing. “BMW Group India has very strong local production and localisation in the India market and remains committed towards that,” he said.

Safeguards for Domestic Interests

The Indian government has reportedly built in sufficient protections for sectors considered sensitive, including the automobile industry. This cautious approach, along with the long timeline for duty reductions and the quota mechanism, reflects a balancing act between opening trade and shielding domestic manufacturing.

As the agreement moves towards implementation, industry players and consumers alike will be closely watching how its provisions play out in practice, especially with broader negotiations like the India-EU FTA also underway.