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Currently, ultra-luxury cars currently attract import duties exceeding 100 per cent .India’s ultra-luxury car market, worth an estimated ₹2,000 crore annually, is facing uncertainty due to a lack of clarity on the timeline for rollout of the UK-India Free Trade Agreement (FTA).
At stake are British marques such as Rolls-Royce, Aston Martin, Bentley and McLaren besides some models from Jaguar Land Rover like the Range Rover SV or the BMW-made Mini. These brands could see a price reset once the FTA comes into effect, resulting from sharp import duty cuts. That could however take at least 12 to 14 months to happen, analysts and industry experts said, escalating worries at dealerships of such high-end cars already battling deferment of consumer purchases.
A total of 250 ultra-luxury imported cars were sold in calendar 2024, comprising just 0.49 per cent of the total 51,000 luxury cars sold in the Indian market, as per industry estimates. Dealers and executives at super luxury carmakers said, requesting anonymity, that affluent buyers are holding off on purchases in anticipation of lower prices.
Dealers noted a sharp drop in bookings for more than 3000cc petrol-powered vehicles imported as completely built units (CBUs).
Consumers are keenly awaiting the FTA rollout.
No Drastic Drop
Currently, these ultra-luxury cars currently attract import duties exceeding 100 per cent .
Under the proposed FTA, duties could drop to about 30 per cent under a limited quota system, translating to savings of 1-1.5 crore per vehicle.
However, according to an executive at a luxury carmaker, unlike the popular belief, eventually, there won’t be a drastic drop in prices.
“The drop in customs duty from 110 per cent to around 30 per cent won’t fully lower car prices. That’s because much of the cost-like currency rates, shipping, and transfer pricing rules-is fixed and won’t change,” the executive said. “Only about 30-40 per cent of the price depends on customs duty. So, even after the duty cut, buyers will see a smaller price drop than expected.”
Tacking buyer hesitation
Ultra-luxury car brands are scrambling to manage the fallout. Rolls-Royce is offering limited price protection clauses or partial refunds if duties are reduced within six months after purchase – a rare, proactive move that underscores the current level of buyer hesitation. BMW has a similar offer for its Mini 3-Door Cooper S model produced at its Oxford plant in the UK. The company also sells a second Mini model, which is however not covered under the price protection offer as it is imported as a CBU from BMW’s plant in Germany.
Jaguar Land Rover (JLR), on the other hand, is staying on the sidelines.
Imported CBUs account for around 7 per cent of JLR’s monthly volume of 6,000-6,500 cars in India, making the Tata Motors unit cautious in the absence of clarity on the effective date of the new duty regime, said a person aware of the company’s plans.
“The uncertainty is paralysing both buyers and dealers,” said a dealer of imported brands. “We are stuck with duty-paid inventory that may become unsellable overnight, while customers are simply waiting for the price correction. Without clarity, the financial risk is huge.”
Adding further to the confusion is the ambiguity around whether the proposed 30 per cent duty under the FTA includes or excludes the existing 40 per cent agriculture infrastructure and development cess. If the cess is applied over and above the reduced duty, the benefit to end-customers would be significantly diluted.
EVs may lose charge
In addition, the FTA’s exclusion of electric and hybrid vehicles from any duty relief for at least five years runs counter to India’s clean mobility goals, said importers. With ICE vehicles set to become significantly cheaper, while EVs remain taxed at higher levels, the pricing equation could skew demand away from environmentally-cleaner options.
While the FTA will offer a competitive edge to British brands, comparable European ultra-luxury carmakers such as Porsche, Lamborghini, Mercedes Maybach, select AMG models, and Ferrari, among others, are likely to be adversely affected. Without similar duty relief, their models could become relatively costlier, eroding their price-value equation in India’s tightly clustered super-luxury segment, said analysts.
Spokespeople at Porsche and Lamborghini were not immediately available for a comment.
Santosh Iyer, managing director at luxury car market leader Mercedes-Benz India however remains confident of the brand’s appeal and exclusivity
- Published On Aug 5, 2025 at 08:24 AM IST
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