Why is JLR building in India now
In today’s Finshots, we talk about why Tata Motors owned JLR is building cars in India despite the India-EU FTA.
The Story
For quite a long time, every Indian car fan quietly watched as global car launches took place across the world. A sleek hatchback from a small town in Europe, a futuristic Korean EV or a Japanese hybrid that never quite made it to India. That’s because buying a car in India came with an invisible passenger: the government.
India’s automobile sector has been protected by some of the highest import duties seen in the world. Completely Built-Up Units or CBUs attracted duties upwards of 100%, once you factored in the customs, cess and surcharges.
In simple terms, if you bought a foreign-made car, you were almost buying two: One for yourself. One for the government.
That wasn’t accidental.
India’s protectionism wasn’t about keeping foreign cars out. It was about forcing them to build here. If global car makers wanted access to India’s growing middle class, they had to localise production, set up assembly lines, create jobs for the locals, and build supplier networks. And it honestly worked.
Because we aren’t just another car market. India has become a manufacturing hub. Tamil Nadu, Maharashtra, Gujarat all built entire ecosystems around this strategy.
But now, trade has gotten a whole lot easier. Over the past few months, India just signed new agreements that essentially promise smoother imports and lower tariffs on entire industries. From European wines and spirits and pharma equipment to aircraft parts and luxury and performance cars, a lot of industries stand to benefit. In theory, that means more choice, faster access and maybe even better prices, especially for car buyers.
That sounds like a win. Borders are softer, markets are opening and trade relations are better.
Yet at the very same moment, Tata Motors poured ₹9,000 crores into a brand new Jaguar Land Rover (JLR) manufacturing plant in Tamil Nadu. For 30 years, India built factories behind tariff walls. Now the walls are lowering. But instead of stepping back, Tata is building bigger.
But then it makes you ask: If cars, especially premium ones, can move more freely across borders, why build more of them at home?
Well, at first glance, it looks and feels quite contradictory. Imports are getting cheaper, so shouldn’t factories become less necessary?
You see, the contradiction exists only if you assume that trade deals are permanent. But they aren’t.
The reality is that trade agreements are political instruments, shaped by elections, and domestic political pressures. These tariffs can be cut today, sure. But trade policy isn’t set in stone and changes like the weather.
Governments can change. Industries tend to lobby. Safeguard duties quietly reappear. Compliance norms tighten over time. Currency swings or a geopolitical spat erupts.
So what looks like ‘cheap imports forever’ can quickly turn into a ‘cost uncertainty overnight’. For most industries, that uncertainty is a lost night’s sleep.
And for automobiles, that’s dangerous. A car plant is years of infrastructure investment, and even more years just to break even on that cost. Thousands of crores are poured into the land, machinery, robotics and supplier contracts. Once that money enters the project, there’s honestly no quick exit.
And this is where Tata’s global footprint matters. Tata’s JLR subsidiary operates multiple factories in the UK, Ireland, one in Slovakia and a new one in India. But a global manufacturing network doesn’t mean they are immune from tariffs. Geography still matters for profitability.
Even after trade agreements, fully built imported cars are rarely duty-free. Historically, India has imposed 60% to 100% customs duty on CBUs, depending on engine size and value. Even if those duties fall under new agreements, they usually fall gradually, often with quotas or conditions attached. The India-EU FTA is the perfect example.
There’s also the currency risk. If a premium car costs €50,000 at a factory overseas, its rupee price changes every time the exchange rate moves. The margins in the automobile industry are rarely forgiving enough to absorb that kind of volatility.
Then comes freight and compliance. Shipping a vehicle from Europe or East Asia to India adds transport costs, insurance, port handling, homologation certificate (a document issued by a government authority certifying that a vehicle meets the mandated safety, emission and technical standards required for road use), dealer logistics and inventory carrying expenses. These aren’t dramatic individually. But scaled across tens of thousands of units, they compound into structural cost disadvantages.
Now compare that with domestic manufacturing.
By investing ₹9,000 crores into Tamil Nadu, Tata Motors isn’t just adding capacity to its existing factories. They get to build both electric and luxury cars in our backyard ― one of the fastest growing markets in the world.
The proximity matters because JLR recently dealt with a major cyber incident that disrupted operations and forced the company to confront the risks. The logic is that when the production cost is naturally higher, even temporary disruptions and shutdowns also tend to be extremely high, with a trickle-down effect on the entire supply chain.
That’s where India’s demand story changes the equation. Even with import duties on fully built luxury cars, India’s premium car market has been growing at a healthy double digit pace. Just luxury EVs alone grew by 66% in early 2025.
Demand has grown despite protectionism. Rising incomes, startup wealth, capital market gains and aspirational spending have all pushed more buyers toward high-end vehicles. That means if demand is already climbing under high duties, local manufacturing could create an even better opportunity. By producing vehicles in India, there’s lower exposure to any change in currency, freight shipping, and most importantly, protects margins against any future tariff changes.
Besides, a factory in Tamil Nadu isn’t just about serving Indian buyers. It provides optionality. If trade remains smooth, India can function as a competitive export base for right-hand-drive markets. If trade tightens again, domestic capacity insulates the company from external shocks.
Automobile plants operate on 20- to 30-year horizons. Factories are slower to build, even though this plant came up in just 16 months. Once built, they are far steadier. The Tamil Nadu facility represents one of the largest investments by Tata Motors. It will create over 5,000 jobs and produce both luxury and EV cars, for both JLR and Tata Motors Passenger Vehicle segments.
It also doesn’t hurt that Tamil Nadu isn’t new to automobiles. It contributes a substantial share of India’s auto exports and houses one of the most integrated supplier clusters in the country. Ports, logistics infrastructure, skilled labour pools and ancillary industries already exist.
That value addition creates more than cars. It creates jobs, supplier contracts, tax revenue and export potential.
So yeah, historically India used high tariffs to push global carmakers to manufacture locally. But this time feels different. Even as trade barriers soften, Tata isn’t stepping back. It’s doubling down on its domestic base — not because imports are impossible, but because long-term certainty still outweighs short-term convenience.
After all, even though trade agreements open doors, strategically planned factories ultimately decide who survives when those doors close.
Until then…
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