- Import duties on European cars could be reduced in a phased manner
- Luxury carmakers stand to benefit the most
The proposed India–European Union Free Trade Agreement (FTA) is back in focus, and one of the most talked-about outcomes is its potential impact on the Indian automobile market. If finalised, the deal could reshape how European luxury cars are priced and sold in the country.
What is the India–EU FTA?
The India–EU FTA is a proposed trade agreement between India and the European Union that aims to reduce tariffs, ease regulations, and improve market access for goods and services between the two regions. For the auto sector, this primarily means a possible reduction in import duties on vehicles and components sourced from EU countries.
Key points for the auto sector
- India currently levies import duties of up to 100 percent on fully built units (CBUs).
- The FTA may introduce a phased reduction in these duties, not an immediate cut.
- Benefits could be linked to conditions such as minimum pricing, limited volumes, or localisation commitments.
- Electric vehicles remain a key discussion point, with the EU pushing for easier access to the Indian market.
Why it matters to India?
For Indian buyers, the agreement could translate into lower prices for premium and luxury cars, especially niche and low-volume models. For the industry, it brings access to advanced technology, safety systems, and EV platforms.
However, India remains cautious. The government is keen to ensure that reduced duties do not hurt local manufacturing or discourage global carmakers from investing in Indian production facilities.
Current status
Negotiations for the India–EU FTA began in 2007 but were put on hold in 2013 due to disagreements over tariffs, sustainability clauses, and regulatory norms. Talks were officially revived in 2022 and are ongoing, with automobiles continuing to be one of the most sensitive chapters in the agreement.
Carmakers and models that could benefit
European luxury brands are expected to gain the most if import duties are reduced. These include:
- Mercedes-Benz – E-Class, S-Class, EQS
- BMW – 5 Series, 7 Series, iX, i7
- Audi – A6, A8, Q8 e-tron
- Volvo – XC90, EX90
- Volkswagen Group brands such as Porsche, Skoda, and Volkswagen, especially for low-volume and performance-oriented models
- Fully imported EVs and high-end petrol models are likely to see the biggest price corrections, while mass-market cars may see limited impact.
What lies ahead?
While the India–EU FTA promises wider choices and potentially more accessible luxury cars, its final structure will determine how meaningful the benefits are. The challenge remains striking a balance between consumer affordability and safeguarding India’s manufacturing ecosystem.
