NEW DELHI: The India-UK trade deal is due to be signed on Wednesday, but the lead-up to the much-anticipated Comprehensive Economic and Trade Agreement (CETA), cleared by the Cabinet on Monday, has dented the order books of the luxury car industry.The UK is home to luxury car brands such as Land Rover, Jaguar (both owned by Tata Motors), Rolls Royce, Bentley, Aston Martin, Lotus, and McLaren. The announcement of a free trade agreement between India and the UK in May, which envisages reducing the import duty on cars to 10% against the current 75-125% on completely built units, has prompted many ultra-wealthy customers to put their bookings on hold, with a few even opting for cancellation, to take advantage of lower duty benefit.

“It is very frustrating for us as many customers are putting their bookings on hold even after we placed their orders with the brands. This creates a bad name for the Indian market as luxury car brands, many of whom produce vehicles in limited numbers to maintain exclusivity, start diverting the production to other markets,” a prominent dealers of a key brand told TOI. “While we do not have clarity on the timelines regarding the reduction of import duty and whether it will happen progressively and over a number of years, the postponement in bookings is leading to losses for the dealer community,” the retailer added.The excitement for buyers due to the lower duty rates is also understandable considering that the final on-road price for some brands is nearly three times the price that a buyer pays in the UK. It’s not just the high import duty rates that bump up the prices in India, but customers also pay other local taxes and charges for registration.However, the customer exodus – which was high when the deal was announced in early May – seems to be moderating now as dealers provide more clarity to the customers.“Broadly, we are telling them that it may not be a loss for them to buy even now. First, the trade deal will still take about a year to be implemented. So, any duty reduction will happen only after that. Also, a full reduction in duty to 10% may not happen immediately but may take place over a number of years along with annual quotas,” another dealer said.“Importantly, we apprised them that prices of luxury vehicles generally go up by around 5% every year, and one has also seen a similar rise due to a weakening of the rupee against the pound. So, simply waiting to see the duty come down over the years will mean a delay in getting access to the car, and also buying at increased prices,” the dealer said.