New Delhi – In a significant development for the Indian automotive market, European cars are poised to become considerably more affordable following the imminent announcement of a Free Trade Agreement (FTA) between India and the European Union (EU).
After years of negotiations, the landmark deal—which could be announced as early as Tuesday, January 27—promises to slash import duties on qualifying vehicles, potentially reshaping the luxury and premium car segments in the country.
Major Cut in Import Duties Under the reported terms of the agreement, India will immediately reduce import tariffs on European-manufactured internal combustion engine (ICE) cars. Currently, fully built imported cars face customs duties ranging from 70% to 110%. The new deal will see these rates drop sharply to 40% for a limited quota of vehicles priced above €15,000 (approximately ₹16.28 lakh).
The relief doesn’t stop there; the agreement outlines a roadmap for further reductions, with duties expected to fall as low as 10% over the coming years.
EVs Excluded for Now Notably, the duty cuts come with a strategic exception for Electric Vehicles (EVs). To safeguard the interests of domestic EV manufacturers like Tata Motors and Mahindra & Mahindra, import tariffs on European EVs will remain unchanged for the first five years of the agreement. Reductions in this sector will only be considered after this initial protectionist period expires.
Luxury and Performance Markets to Benefit The biggest beneficiaries of this policy shift will be European luxury and supercar manufacturers. While brands like Mercedes-Benz, BMW, Audi, and Volvo already assemble many of their high-volume models in India to avoid high tariffs, their fully imported lineup will see substantial price corrections.
Enthusiasts can expect price drops on:
- Performance Models: BMW M series, Mercedes-AMG, and Audi RS lines.
- Supercars: Ferrari, Lamborghini, Maserati, and Porsche models.
- Niche Imports: Vehicles like the Land Rover Defender (imported from Slovakia) are also expected to see price reductions.
Mass-market European players like Volkswagen and Skoda could also leverage the deal to bring in more global models that were previously deemed too expensive for the price-sensitive Indian market.
