Prime Minister Narendra Modi on Tuesday confirmed that India and the European Union have finalised their long-awaited free trade agreement (FTA), ending nearly two decades of negotiations. For many Indian consumers, the key question now is whether European cars—especially premium German brands—will finally become more affordable.
Currently, fully imported European cars face some of the highest import duties in the world, ranging from 70% to as much as 110%. These steep taxes are the primary reason why brands such as BMW, Mercedes-Benz, Audi and Volvo cost significantly more in India than in Europe. The newly finalised India–EU trade deal is expected to significantly alter this pricing structure.
Under the agreement, India is likely to reduce import duties to around 40% for a limited number of European cars priced above roughly USD 17,700 (about Rs 16.3 lakh), according to reports. Over time, these tariffs could be reduced further in phases, potentially moving closer to 10%, which aligns with global norms. While the reductions will not take effect immediately, the direction of policy is clear.
The biggest impact will be on fully built units (CBUs), which currently attract the highest duties. Cars assembled in India from imported parts, known as CKDs, already fall under lower tax brackets and are therefore unlikely to see major price changes. As a result, the most noticeable benefits will be felt in the premium and luxury segments.
Luxury carmakers such as Mercedes-Benz, BMW, Audi, Porsche, Volvo and Volkswagen stand to gain the most from the tariff cuts. Buyers in these segments could see meaningful price relief once the phased reductions are implemented. In contrast, mass-market buyers are unlikely to notice much difference, as most affordable European models are already assembled locally and compete in a highly price-sensitive market dominated by Indian and Asian manufacturers.
Electric vehicles are expected to remain excluded from the duty cuts for at least the first five years. This move is aimed at protecting domestic EV investments by Indian manufacturers, meaning imported electric models from European brands will continue to carry a premium.
Key details such as the final tariff schedule, annual import quotas and the pace of duty reductions will determine how much of the benefit reaches consumers. Automakers will also decide how much of the cost savings they pass on to buyers.
While the changes will be gradual and selective, the India–EU FTA offers the strongest signal yet that imported European cars—particularly in the premium segment—are set to become more affordable in India over the coming years.
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