Quick Takeaways
- India EU Free Trade Agreement lowers import duty on European cars, reshaping India’s luxury vehicle market.
- The trade deal brings phased tariff relief for ICE vehicles while excluding electric cars for now.
India and the European Union have formally signed a free trade agreement, marking a major shift in trade relations between the two regions. Under the India EU Free Trade Agreement, import tariffs on European passenger cars will be reduced sharply in a phased manner, opening limited access to the Indian market.
As per the agreement, import duties on European cars will gradually fall from 110 percent to 10 percent for an annual quota of 250,000 vehicles. The final price bracket of models eligible for these reduced tariffs is yet to be officially confirmed.
Import Duty Reduction Under the India EU Free Trade Agreement
Currently, India levies an import duty of 70 percent on cars priced below USD 40,000, while vehicles priced above USD 70,000 attract a steep 110 percent duty. The India EU Free Trade Agreement introduces a structured reduction in these rates, offering relief to select imported models over time.
However, the scope of the agreement is clearly defined. Only internal combustion engine vehicles are covered under the current framework. Electric vehicles remain excluded and will continue to attract import duties of up to 110 percent depending on their declared value.
ICE Vehicles Gain, Electric Cars Remain Excluded
The agreement makes it clear that tariff benefits will apply exclusively to ICE-powered vehicles for now. Electric vehicles do not receive any concessions under the deal, highlighting India’s cautious approach toward opening its EV import market.
This selective approach ensures that the initial impact remains limited while giving policymakers room to reassess electric vehicle duties at a later stage.
Luxury and Performance Brands to Benefit the Most
Once implemented, the India EU Free Trade Agreement is expected to benefit a niche segment of the Indian automotive market. High-end luxury and performance vehicles imported as completely built units stand to gain the most from the reduced tariffs.
Car Parts Tariffs to Be Phased Out
Beyond fully built vehicles, the agreement also addresses automotive components. Tariffs on imported car parts from the EU will be completely eliminated over a period ranging from five to ten years. This move could gradually lower costs for premium vehicle servicing and assembly operations linked to European brands.
Two-Decade Negotiation Finally Reaches Closure
The India EU Free Trade Agreement comes into force after more than 20 years of negotiations. Talks were first initiated in 2007 but were put on hold in 2013 due to unresolved differences. Discussions resumed in 2022, with the final round of negotiations concluded in October 2025.
The deal is expected to be implemented within a year, setting the stage for a controlled but meaningful opening of India’s premium automotive import market while keeping broader protections intact.
As per the agreement, import duties on European cars will gradually fall from 110 percent to 10 percent for an annual quota of 250,000 vehicles. The final price bracket of models eligible for these reduced tariffs is yet to be officially confirmed.
Import Duty Reduction Under the India EU Free Trade Agreement
Currently, India levies an import duty of 70 percent on cars priced below USD 40,000, while vehicles priced above USD 70,000 attract a steep 110 percent duty. The India EU Free Trade Agreement introduces a structured reduction in these rates, offering relief to select imported models over time.
However, the scope of the agreement is clearly defined. Only internal combustion engine vehicles are covered under the current framework. Electric vehicles remain excluded and will continue to attract import duties of up to 110 percent depending on their declared value.
ICE Vehicles Gain, Electric Cars Remain Excluded
The agreement makes it clear that tariff benefits will apply exclusively to ICE-powered vehicles for now. Electric vehicles do not receive any concessions under the deal, highlighting India’s cautious approach toward opening its EV import market.
This selective approach ensures that the initial impact remains limited while giving policymakers room to reassess electric vehicle duties at a later stage.
Luxury and Performance Brands to Benefit the Most
Once implemented, the India EU Free Trade Agreement is expected to benefit a niche segment of the Indian automotive market. High-end luxury and performance vehicles imported as completely built units stand to gain the most from the reduced tariffs.
- Brands such as Mercedes-Benz, along with sports car manufacturers including Ferrari, Lamborghini, and Porsche, are expected to see improved pricing competitiveness in India once the new duty structure takes effect.
Car Parts Tariffs to Be Phased Out
Beyond fully built vehicles, the agreement also addresses automotive components. Tariffs on imported car parts from the EU will be completely eliminated over a period ranging from five to ten years. This move could gradually lower costs for premium vehicle servicing and assembly operations linked to European brands.
Two-Decade Negotiation Finally Reaches Closure
The India EU Free Trade Agreement comes into force after more than 20 years of negotiations. Talks were first initiated in 2007 but were put on hold in 2013 due to unresolved differences. Discussions resumed in 2022, with the final round of negotiations concluded in October 2025.
The deal is expected to be implemented within a year, setting the stage for a controlled but meaningful opening of India’s premium automotive import market while keeping broader protections intact.
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