Quick Takeaways
- India-EU FTA car import duty reduction signals a major shift in India’s auto trade policy with Europe.
- The agreement could reshape pricing for European luxury and mass-market cars in India.
After years of prolonged negotiations, India and the European Union are nearing the announcement of a landmark free trade agreement that could significantly alter the automotive import landscape. The India-EU FTA car import duty reduction is expected to sharply lower tariffs on European-built cars entering the Indian market, improving affordability across segments.
As per reports, the agreement may be announced as early as Tuesday, January 27, marking a major milestone in bilateral trade relations. The deal follows India’s recent free trade agreement with the UK and signals a broader push to recalibrate import policies for high-value goods.
Import duty cuts under the India-EU FTA
According to reporting, the Indian government has agreed to immediately reduce import duties on select European-manufactured vehicles once the agreement comes into force. Under the revised structure, limited volumes of EU-built cars priced above €15,000 will see tariffs drop from as high as 110 percent to 40 percent.
Over subsequent years, these duties are expected to be phased down further, eventually reaching 10 percent. The reductions apply specifically to vehicles meeting defined eligibility criteria and will initially be capped by volume limits to manage market impact.
No immediate relief for European electric vehicles
While the India-EU FTA car import duty reduction applies immediately to internal combustion engine vehicles, electric vehicles remain excluded in the initial phase. Import tariffs on European EVs will stay unchanged for the first five years after the agreement is finalised and ratified.
Reduced duties on electric vehicles will only be implemented after this five-year period. This provision is intended to safeguard domestic EV manufacturers, including Mahindra and Tata, during the early stages of market expansion.
European brands likely to benefit
The agreement is expected to benefit a wide range of European automakers operating in India. Premium manufacturers such as BMW, Audi, Volvo, and Mercedes-Benz already assemble several models locally through the CKD route, allowing them to access lower duties even today.
However, performance-oriented imports from BMW M, Mercedes-AMG, and Audi RS divisions could see meaningful price reductions once the revised tariff structure takes effect. Imported niche models such as the Land Rover Defender, sourced from Slovakia, may also become more competitively priced.
Ultra-luxury and sports car brands including Ferrari, Lamborghini, Maserati, and Porsche are expected to gain as well. Mass-market European manufacturers like Volkswagen and Skoda could also find it easier to introduce imported models under the new framework.
With the India-EU FTA car import duty reduction, the Indian automotive market is poised for greater product diversity, improved access to European models, and intensified competition across price segments, while maintaining protective measures for domestic EV manufacturing.
As per reports, the agreement may be announced as early as Tuesday, January 27, marking a major milestone in bilateral trade relations. The deal follows India’s recent free trade agreement with the UK and signals a broader push to recalibrate import policies for high-value goods.
Import duty cuts under the India-EU FTA
According to reporting, the Indian government has agreed to immediately reduce import duties on select European-manufactured vehicles once the agreement comes into force. Under the revised structure, limited volumes of EU-built cars priced above €15,000 will see tariffs drop from as high as 110 percent to 40 percent.
Over subsequent years, these duties are expected to be phased down further, eventually reaching 10 percent. The reductions apply specifically to vehicles meeting defined eligibility criteria and will initially be capped by volume limits to manage market impact.
No immediate relief for European electric vehicles
While the India-EU FTA car import duty reduction applies immediately to internal combustion engine vehicles, electric vehicles remain excluded in the initial phase. Import tariffs on European EVs will stay unchanged for the first five years after the agreement is finalised and ratified.
Reduced duties on electric vehicles will only be implemented after this five-year period. This provision is intended to safeguard domestic EV manufacturers, including Mahindra and Tata, during the early stages of market expansion.
European brands likely to benefit
The agreement is expected to benefit a wide range of European automakers operating in India. Premium manufacturers such as BMW, Audi, Volvo, and Mercedes-Benz already assemble several models locally through the CKD route, allowing them to access lower duties even today.
However, performance-oriented imports from BMW M, Mercedes-AMG, and Audi RS divisions could see meaningful price reductions once the revised tariff structure takes effect. Imported niche models such as the Land Rover Defender, sourced from Slovakia, may also become more competitively priced.
Ultra-luxury and sports car brands including Ferrari, Lamborghini, Maserati, and Porsche are expected to gain as well. Mass-market European manufacturers like Volkswagen and Skoda could also find it easier to introduce imported models under the new framework.
With the India-EU FTA car import duty reduction, the Indian automotive market is poised for greater product diversity, improved access to European models, and intensified competition across price segments, while maintaining protective measures for domestic EV manufacturing.
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