Under the deal, India has agreed to a quota-based reduction in import duties on European automobiles, with tariffs set to fall to as low as 10 per cent over five years. This may make premium European brands such as Mercedes-Benz, BMW, Audi, Ferrari, Porsche, Lamborghini, Rolls-Royce, and Bentley cheaper in the long run.
Based on the quota, India will allow up to 250,000 vehicles from Europe at preferential rates, versus hardly 37,000 vehicles mentioned in the UK trade deal.
Currently, “locally manufactured cars” attract a basic customs duty of 16.5 per cent, while imported vehicles from the EU attract up to 125 per cent duty. Reduced duty will bring down showroom prices considerably in India.
According to reports, the mass market will be largely unaffected, as the concessions will apply mainly to cars priced above ₹25 lakh. Despite this, speculation about rising competition from global majors has led to shares of major Indian automobile manufacturers such as Mahindra & Mahindra (M&M), Maruti Suzuki India, and Tata Motors taking a hit on the BSE on Tuesday, down by 4.19 per cent, 1.48 per cent, and 1.06 per cent, respectively.
On the other hand, for the components industry, this will boost exports, technology partnerships, and investment-led growth, as the EU comprises 30 per cent of India's component exports. In FY25, component exports from India to the region were seen at $6.75 billion versus imports of $5.77 billion from the EU.
The free trade deal is expected to boost the luxury vehicle market, which contributes only about one per cent of the passenger vehicle market. However, those having local units are not expecting any immediate price reduction. Industry sources told Business Standard that as the rupee depreciated by 19 per cent in 2025 compared to the euro, any benefit arising from lower duty imports for CBUs in the next couple of years may be eroded. Hence, companies were reluctant to give any price predictions.
“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,” said Hardeep Singh Brar, president and chief executive officer, BMW Group India.
Santosh Iyer, managing director and chief executive officer, Mercedes-Benz India, said, “The FTA is expected to strongly drive technological innovation and sustainable growth within the Indian automotive sector, with a sharp focus on future mobility.”
The company does not foresee any price reduction for Mercedes-Benz vehicles due to the FTA in the foreseeable future, as more than 90 per cent of Mercedes-Benz India’s sales volume comprises ‘Made in India’ locally manufactured models, and only 5 per cent of sales come via CBU imports from the EU.
“Any implications for pricing and the market can only be assessed once the final terms are available and carefully reviewed, including the timeframe of implementation. This will create a stable and predictable environment for European automakers to invest, innovate, and better serve customers in India,” said Balbir Singh Dhillon, brand director, Audi India.
For India’s auto-component industry, the agreement will lead to enhanced export competitiveness, facilitate deeper technology collaboration, and attract long-term investments, while enabling European companies to leverage India’s fast-growing automotive market — the world’s third largest.
“The signing of the India–EU FTA is a timely and strategic step. For the auto-components industry, it has the potential to unlock new opportunities for exports, technology partnerships, and investment-led growth. As global OEMs and suppliers look to build resilient supply chains, a well-balanced and pragmatic FTA can position India as a reliable manufacturing and sourcing partner for Europe, while strengthening our long-standing industrial partnership,” said Vikrampati Singhania, president, The Automotive Component Manufacturers Association of India, and vice-chairman and MD, JK Fenner (India).
Shailesh Chandra, president, Siam and managing director and CEO Tata Motors Passenger Vehicles Ltd, said, “The FTA with EU will play a key role as India marches on towards ‘Viksit Bharat’. The calibrated approach to balance market access and domestic manufacturing, should give us a win-win between increased global participation on one hand and growth of the domestic auto industry with investments and employment on the other hand. This will also enable increased choice for consumers in both regions.”
 "Luxury cars")