India-EU FTA opens door to more premium models, not immediate price cuts: Carmakers

Cars priced above USD 40,000 and imported as CBUs in India attract import duties of around 110%.

• India-EU FTA to cut car import tariffs from up to 110% to 10% over five years.
• Luxury automakers foresee more premium models, faster tech, no immediate price cuts.
• Tariff cuts exclude CKD kits; impact depends on quotas and phased implementation.

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European automakers have welcomed the India-EU Free Trade Agreement (FTA), but signal that its near-term impact is likely to be seen in expanded premium model offerings and faster technology access, rather than immediate price cuts.

India-EU FTA: What is there for the auto sector?

The trade pact will reduce import tariffs on cars manufactured in the European Union (EU) from as high as 110% to 10%, subject to an annual quota of 2,50,000 vehicles. However, industry executives indicate that pricing implications will depend on the phased implementation timeline, quota limits and final qualification criteria.

Under the agreement, tariffs on eligible EU-built cars priced above 15,000 euros (Rs 16.40 lakh) will be gradually lowered from around 30-35% at implementation, which is expected by the end of calendar year (CY) 2026, to 10% over five years, depending on the segment. Electric vehicle (EV) import quotas will apply only from the fifth year, while completely knocked down (CKD) kits are excluded from tariff concessions. Tariffs on auto parts will be fully abolished over five to 10 years, according to the European Commission.

In India, cars imported as completely built units (CBUs) priced up to USD 40,000 attract a 70% Basic Customs Duty. Models priced above USD 40,000 face the same 70% Basic Customs Duty, along with an additional 40% Agriculture Infrastructure and Development Cess, taking the effective total import tax to around 110%. In contrast, CKD kits assembled locally face a significantly lower duty of about 16.5%.

India-EU FTA: What luxury players think?

Luxury carmakers, which already rely heavily on local assembly, said the FTA could expand access to top-end global models and niche imports, even as localisation remains central to their India strategy.

Mercedes-Benz India: Santosh Iyer, MD and CEO

"Mercedes-Benz welcomes the India-EU FTA as it will have a positive cascading effect on customer sentiments for the luxury segment, with a boost in overall economic growth. A gradual tariff reduction on vehicles and fully liberalised automotive parts are strategically important decisions in the FTA for the automotive industry. The FTA opens up new avenues for customers with improved vehicle allocations, better availability of top-end global models for the Indian market, faster access to the latest technology and creating a stronger luxury car ecosystem. Mercedes-Benz will however, continue to value add to customers with local production of world-class models from our manufacturing plant.

With more than 90% of Mercedes-Benz India's sales volumes comprising locally manufactured models, and only around 5% of sales coming via CBU imports from EU, we do not foresee any price reduction for Mercedes-Benz vehicles from the FTA, in the foreseeable future. We will continue our focus on value addition to customers through local production, making world-class vehicles in India, for Indian customers."

BMW Group India: Hardeep Singh Brar, President and CEO

"The conclusion of the India-EU FTA is a historic and ambitious milestone, reflecting the growing strategic and economic relevance of India on the global stage. We have always advocated free trade as it enhances fair market access, strengthens economic collaboration, leverages mutual strengths, and builds more resilient supply chains, especially at a time when such cooperation is more critical than ever.

The proposed phased reduction of tariffs on cars and auto components has the potential to positively impact consumer confidence, enable greater product choice, and foster technological innovation and sustainable growth within the Indian automotive sector, particularly in future mobility.

At BMW Group India, over 95% of our volumes come from locally manufactured models, with fully imported vehicles accounting for only about 5% of our sales. While we do not foresee any immediate price changes in the near term, the FTA could create opportunities to introduce new and niche products and, if demand scales, support deeper localisation over time. We will closely evaluate the detailed implementation roadmap, timelines and qualification criteria once the fine print of the agreement is available."

Audi India: Balbir Singh Dhillon, Brand Director

"We welcome the FTA between India and the EU and recognise its potential to deepen economic ties with one of the world's largest trading blocs. This constructive approach to trade could support the broader automotive ecosystem, including innovation, supply-chain efficiency and technology collaboration.

That said, any implications for pricing and market can only be assessed once the final terms are available and carefully reviewed, including the timeframe of implementation. Until then, it would be premature to draw conclusions on specific commercial or product strategies. We are positive that India-EU FTA will create a stable and predictable environment for European automakers to invest, innovate and better serve customers in India."

Skoda Auto Volkswagen India: Piyush Arora, MD and CEO

"I heartily welcome the forward-looking India-EU FTA, which will further strengthen cooperation between the two regions. As a global company, we strongly support free-trade agreements across markets and geographies. With the EU being one of India's largest trading partners, this agreement will further propel the Indian economy, benefit the EU as well, and truly be a win-win for both regions.

We believe this agreement will benefit customers in both regions. Greater tariff certainty and a more predictable trade framework will allow us to evaluate the introduction of a wider range of European models for Indian customers. Over time, this can support deeper technology transfer, capability building, and long-term investment in the Indian automotive ecosystem. As more details emerge, we will be able to assess the medium- and long-term implications of this agreement."

Skoda Auto Volkswagen India manages the Indian operations of six brands -- Skoda, Volkswagen, Audi, Bentley, Lamborghini and Porsche.

Luxury car sales in India

In CY25, India's luxury passenger vehicle (PV) market clocked around 51,000-52,000 units, led by German brands such as Mercedes-Benz and BMW, with nearly 90% of volumes coming from locally assembled models.

Carmakers including Mercedes-Benz, BMW, Audi and Jaguar Land Rover operate assembly plants in Maharashtra and Tamil Nadu, producing vehicles from imported CKD kits.

While select premium and performance models are imported as CBUs, the FTA's structure suggests that niche and high-end European imports may benefit earlier than mass-market segments, subject to quota availability.

In CY24, EU motor vehicle exports to India were valued at 1.6 billion euros (around Rs 17,400 crore). The European Commission estimates total tariff savings on EU goods of around 4 billion euros (Rs 43,488 crore) per year, with EU exports to India expected to double by CY32.

However, with quotas, phased tariff cuts, and exclusions on CKD units, automakers indicate the agreement is likely to reshape product strategy, technology access, and premium portfolio depth before delivering meaningful near-term price relief.