Quick Takeaways
- India EU Free Trade Agreement seen as a long-term growth driver for India’s automotive industry.
- The agreement is expected to strengthen trade integration, investment flows, and consumer sentiment.
The India EU Free Trade Agreement concluded after more than 16 years of negotiations is expected to create the world’s largest free trade zone, delivering benefits that extend far beyond tariff reductions, according to Santosh Iyer, Managing Director and CEO of Mercedes-Benz India. He said the agreement represents a pivotal moment for India’s long-term economic trajectory.
Iyer emphasised that the sheer scale of the pact and its macroeconomic implications outweigh narrower discussions focused only on import duties. “After more than 16 years of intense negotiations, it has finally come to reality. This actually makes the biggest free trade zone in the world,” he said, adding that broader economic gains matter more than tariff changes alone.
India EU Free Trade Agreement and Economic Integration
The agreement is expected to accelerate integration across multiple dimensions, including supply chains, movement of people, investment flows, and business collaboration. Iyer noted that the timing aligns well with India’s economic ambitions, positioning the country to extract maximum value as global trade dynamics evolve.
He said the deal could act “as a structural growth catalyst as India progresses towards becoming a $5 trillion and eventually a $10 trillion economy,” underlining its role in long-term national development rather than short-term trade advantages.
Automotive Demand, Incomes, and Long-Term Impact
Highlighting the strong link between per-capita income growth and luxury vehicle demand, Iyer said Mercedes-Benz India’s sales have doubled over the past decade as incomes increased. The India EU Free Trade Agreement could further support sustained consumption growth by simplifying trade frameworks and lowering structural barriers over time.
While the agreement includes tariff rationalisation across:
he cautioned against expectations of immediate price reductions for consumers. The recent appreciation of the euro, he said, continues to offset tariff benefits, limiting near-term pricing impact.
“The indirect advantage of macroeconomic development, GDP increase, and simplification of business with lower tariff structures is the real positive,” Iyer said, adding that improved consumer sentiment, including in the luxury segment, could emerge even before full implementation.
Implementation Timeline and Strategic Outlook
Initial estimates suggested the agreement could come into force around 2028, but efforts are now underway to advance implementation to 2027. This would be followed by an 18–24-month period for the full economic effects to materialise. “The key will lie in execution and how soon it is implemented,” he said.
From a longer-term perspective, Iyer said the India EU Free Trade Agreement positions India to benefit from deeper global trade integration, stronger competitiveness of its manufacturing and component ecosystem, and sustained economic expansion, making it a structural, long-term win rather than a short-term trade stimulus.
Iyer emphasised that the sheer scale of the pact and its macroeconomic implications outweigh narrower discussions focused only on import duties. “After more than 16 years of intense negotiations, it has finally come to reality. This actually makes the biggest free trade zone in the world,” he said, adding that broader economic gains matter more than tariff changes alone.
India EU Free Trade Agreement and Economic Integration
The agreement is expected to accelerate integration across multiple dimensions, including supply chains, movement of people, investment flows, and business collaboration. Iyer noted that the timing aligns well with India’s economic ambitions, positioning the country to extract maximum value as global trade dynamics evolve.
He said the deal could act “as a structural growth catalyst as India progresses towards becoming a $5 trillion and eventually a $10 trillion economy,” underlining its role in long-term national development rather than short-term trade advantages.
Automotive Demand, Incomes, and Long-Term Impact
Highlighting the strong link between per-capita income growth and luxury vehicle demand, Iyer said Mercedes-Benz India’s sales have doubled over the past decade as incomes increased. The India EU Free Trade Agreement could further support sustained consumption growth by simplifying trade frameworks and lowering structural barriers over time.
While the agreement includes tariff rationalisation across:
- Completely built units (CBUs)
- Completely knocked-down kits (CKDs)
- Automotive components
he cautioned against expectations of immediate price reductions for consumers. The recent appreciation of the euro, he said, continues to offset tariff benefits, limiting near-term pricing impact.
“The indirect advantage of macroeconomic development, GDP increase, and simplification of business with lower tariff structures is the real positive,” Iyer said, adding that improved consumer sentiment, including in the luxury segment, could emerge even before full implementation.
Implementation Timeline and Strategic Outlook
Initial estimates suggested the agreement could come into force around 2028, but efforts are now underway to advance implementation to 2027. This would be followed by an 18–24-month period for the full economic effects to materialise. “The key will lie in execution and how soon it is implemented,” he said.
From a longer-term perspective, Iyer said the India EU Free Trade Agreement positions India to benefit from deeper global trade integration, stronger competitiveness of its manufacturing and component ecosystem, and sustained economic expansion, making it a structural, long-term win rather than a short-term trade stimulus.
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