India and the European Union have finalized a long-awaited Free Trade Agreement (FTA), marking a major breakthrough after nearly two decades of negotiations. One of the most significant outcomes of the deal is a sharp reduction in import duties on European-made cars, which is expected to make luxury and premium vehicles more affordable in India.

Massive Cut in Import Tariffs

Under the agreement, import duties on European cars will be gradually reduced from the current 110% to around 10%. However, this benefit will apply only within a fixed annual quota of 2.5 lakh (250,000) vehicles.

At present, India levies:

• 70% basic customs duty on imported passenger cars priced below $40,000 (around ₹36.7 lakh)

• Up to 110% total duty on cars priced above $40,000

The new FTA aims to significantly lower these barriers, particularly for high-end vehicles.

Key Highlights of the India–EU Trade Deal

• Duty reduction applies only to vehicles priced above ₹25 lakh

• Annual import quota capped at 2.5 lakh units

• Higher quota allocated to premium and luxury cars

• No duty exemption for bus imports from Europe

• Limited exemption allowed for truck imports under quota

• Uniform tax cap of ₹25 lakh applicable to EVs, petrol, and diesel cars

• Affordable and entry-level cars will not benefit from the duty cut

Luxury Car Brands to Benefit

The agreement is expected to boost the presence of several European automobile brands in India. Companies likely to gain include BMW, Mercedes-Benz, Audi, Porsche, Volkswagen, Skoda, Volvo, and Maserati. Luxury and high-performance models, especially from German manufacturers, could see noticeable price reductions.

Boost to India–EU Trade Relations

India–EU bilateral trade is projected to cross $190 billion in 2024–25. During this period:

• India exported $75.9 billion in goods and $30 billion in services to the EU

• The EU exported $60.7 billion in goods and $23 billion in services to India

India is currently the world’s third-largest car market, after the US and China. However, its automobile sector has long been considered one of the most protected globally due to steep import duties. These tariffs have even drawn criticism from global industry leaders, including Tesla CEO Elon Musk.

What This Means for Consumers

While mass-market buyers may not see immediate benefits, the FTA could reshape India’s luxury car market, offering more choices at relatively lower prices and increasing competition among premium brands.