Shares of leading Indian automobile companies witnessed a sharp sell-off on Tuesday as concerns grew over the India–European Union Free Trade Agreement (FTA), which is expected to lower import duties on European cars. Investors fear that cheaper imports could intensify competition and hurt domestic manufacturers.

Major Auto Stocks Under Pressure

• Mahindra & Mahindra (M&M) fell 5.1%, hitting its lowest level since August 2025

• Hyundai Motor India declined 4.5%

• Maruti Suzuki India slipped 3%

• Tata Motors Passenger Vehicles dropped 2%

The broader Nifty Auto index fell 2.2%, led by heavy selling in auto majors.

What Triggered the Market Reaction?

According to a Reuters report, India is considering cutting import duties on cars from the EU from 110% to 40%, as negotiations near completion. The agreement could be finalized as early as Tuesday.

The proposed move includes:

• Immediate duty cuts on a limited number of imported cars

• Applicable to vehicles priced above 15,000 euros ($17,739)

Such a move would benefit European automakers like Volkswagen, Renault, Stellantis, and luxury brands such as Mercedes-Benz and BMW.

Why Indian Automakers Are Concerned

Indian auto companies have long opposed lowering import duties, arguing that cheaper imports would:

• Make foreign vehicles more competitive

• Hurt domestic manufacturing

• Discourage long-term investment in India

This concern has now translated into market anxiety, triggering a sell-off in auto stocks.

Limited Impact Expected, Say Analysts

Despite the sharp reaction, analysts believe the long-term impact may be limited. Emkay Global noted that if the India–EU FTA mirrors the India–UK trade deal, the effect on Indian passenger vehicle makers would be minimal.

Key reasons:

• European automakers currently hold less than 4% of India’s 4.4 million-unit annual car market

• The Indian market is dominated by Maruti Suzuki, Mahindra, and Tata, which together control nearly two-thirds of sales

• Most imported CBU vehicles fall in the super-luxury segment (₹1–1.5 crore)

• Brands like BMW, Mercedes-Benz, and Audi already assemble over 70% of their cars locally

Silver Lining for Two-Wheeler Exporters

Emkay Global added that a possible reduction in import duties on Indian motorcycles in the EU—currently close to 8%—could benefit exporters such as:

• Bajaj Auto (KTM, Triumph)

• TVS Motor (BMW Motorrad, Norton)

Since European countries also levy VAT on the vehicle price and duties, any reduction could significantly lower overall costs and boost exports.