Lower tariffs present opportunities for European automakers like Volkswagen, Mercedes-Benz and BMW to export CBUs from Europe, though these companies already assemble CKD kits in India at approximately 16% tariff.
27 Jan 2026 | 624 Views | By Autocar Professional Bureau
India and the European Union concluded FTA talks on Tuesday, marking the largest trade deal signed by either side. The agreement will gradually reduce import duty on EU motor vehicles to India from 110% to 10%, subject to a 250,000 vehicle annual quota. Duties on car parts will be phased ...
This is an Autocar Pro Plus article. Subscribe to continue reading.
India and the European Union concluded FTA talks on Tuesday, marking the largest trade deal signed by either side. The agreement will gradually reduce import duty on EU motor vehicles to India from 110% to 10%, subject to a 250,000 vehicle annual quota. Duties on car parts will be phased out over five to ten years.
Currently, India levies 70% duty on imported cars priced below $40,000 and 110% on those above. The Ministry of Commerce & Industry said the "quota-based auto liberalisation package" will allow EU automakers to introduce models in higher price bands while opening possibilities for Make in India and exports.
In 2024, EU motor vehicle imports to India were valued at €1.6 billion, while component exports stood at $5.77 billion. Current component import duties range from 7.5-15%.
Lower tariffs present opportunities for European automakers like Volkswagen, Mercedes-Benz and BMW to export CBUs from Europe, though these companies already assemble CKD kits in India at approximately 16% tariff.
Hardeep Singh Brar, President and CEO, BMW Group India.
“The conclusion of the India–EU Free Trade Agreement 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 ‘Made in India’ 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 localization over time. We will closely evaluate the detailed implementation roadmap, timelines and qualification criteria once the fine print of the agreement is available.”
FADA President CS Vigneshwar
“The India–EU FTA is a milestone for the automotive sector, and we are proud that FADA could contribute meaningfully to its shaping. On the request of Hon’ble Commerce & Industry Minister Shri Piyush Goyal ji, FADA undertook a focused study—combining inputs from select European OEMs with rigorous data analysis—and submitted a detailed representation to the Ministry. We later briefed the Minister in person and engaged with the Secretary leading the India–EU negotiations.
The calibrated tariff glide path, TRQ safeguards and protection for India’s EV trajectory announced today closely reflect the balanced recommendations we had placed on record. With over 95% of European OEM sales already locally manufactured, this FTA strengthens Make-in-India, expands consumer choice and opens reciprocal export opportunities for Indian OEMs.
FADA remains committed to providing evidence-led, industry-grounded perspectives that support India’s ambition to emerge as a global mobility hub.”
Vineet Mittal, Chairman, Avaada Group
“The India–European Union Free Trade Agreement marks an important moment — not only for trade, but for the kind of future two large, democratic economies want to build together. With bilateral trade now exceeding $190 billion and India running a surplus with the EU, this partnership tells a larger story. India today is not just a destination for goods or capital. It is a source of value — across manufacturing, services, and increasingly, clean energy and green technologies.
For India, this agreement adds real strategic strength. It broadens our global relationships, links Indian industry more deeply with European value chains, and brings long-term clarity for businesses, investors, and innovators on both sides. The impact on clean energy could be especially significant. Collaboration in areas like solar manufacturing, batteries, green hydrogen, sustainable fuels, and climate-aligned finance can help Europe move faster on its energy transition, while supporting India’s goal of becoming a global centre for green manufacturing. At Avaada, we see this agreement as an affirmation of India’s journey — from scale to sophistication, from cost advantage to climate leadership. It shows that growth, sustainability, and trust can advance together”.
Shailesh Hazela, CEO and Managing Director, Stellantis India
“The conclusion of the EU–India Free Trade Agreement is a landmark moment that deepens economic cooperation and strengthens India’s position in the global value chain. At Stellantis India, we see this agreement as a significant accelerator for our long-term commitment to ‘Make in India for the World.’ Reduced trade barriers will help enhance manufacturing competitiveness, expand export potential, and support the seamless integration of our India operations into global supply chains.
For our customers in India, this development enables greater access to advanced technologies and the latest offerings from the Stellantis line-up. We appreciate the continued efforts of the Ministry of Commerce & Industry and industry bodies including ACEA, CLEPA, and FEBI in shaping this forward-looking agreement that benefits India’s automotive ecosystem and global partners alike.”
Balbir Singh Dhillon, Brand Director, Audi India
"We welcome the proposed Free Trade Agreement (FTA) between India and the European Union 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 & 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."
Vikrampati Singhania, President, ACMA and Vice Chairman & MD, JK Fenner (India)
“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.”
Kunal Khattar, Founding Partner, AdvantEdge Partners
"Excluding EV’s from the India-EU Free Trade Agreement is a profound missed opportunity that risks stalling our momentum toward a clean & green Viksit Bharat 2047. By leaving electric mobility off the table, we are essentially favoring legacy ICE industries over the trillion-dollar EV transition opportunity. To truly compete with global giants like China, India must anchor its trade alliances around future-ready technologies, not legacy ones. This exclusion doesn't just protect old industries—it prevents the influx of high-end engineering and capital needed to build a globally competitive EV manufacturing hub on Indian soil."
Santosh Iyer, MD & CEO Mercedes-Benz India
“Mercedes-Benz welcomes the India-EU FTA as it will have a positive cascading effect on customer sentiments for the luxury segment, with boost in overall economic growth. A gradual tariff reduction on vehicles and fully liberalized 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 Indian market, faster access to 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.”