New Delhi: India has agreed to grant European automakers an import quota more than six times larger than any it has offered in recent trade deals, significantly lowering tariffs on cars under the India–EU free trade agreement and opening up its tightly protected passenger vehicle market.
According to Bloomberg, under the pact, India will gradually allow up to 250,000 European-made vehicles to enter the country at preferential duty rates, according to people familiar with the negotiations. This compares with a quota of about 37,000 units extended to the UK under a separate trade agreement, underscoring the scale of concessions made to the European Union.
The move is expected to benefit major European carmakers, including Volkswagen Group, Mercedes-Benz Group, Stellantis and Renault, which have long sought improved access to India’s fast-growing auto market.
Tariff cuts phased in over time
Of the total quota, around 160,000 internal combustion engine (ICE) vehicles will see import duties fall to 10 per cent within five years, while 90,000 electric vehicles will be eligible for the same tariff only by the 10th year of the agreement, a measure aimed at protecting India’s nascent EV ecosystem.
Initial in-quota tariffs will start at about 30 per cent for most segments. Beyond the quota, India has agreed to cut duties on fossil-fuel-powered cars to 35 per cent over 10 years, a sharp reduction from current levels that can reach 110 per cent.
Reciprocal access for Indian automakers
In return, the EU will offer Indian automakers—including Mahindra & Mahindra, Tata Motors Passenger Vehicles and Maruti Suzuki India—import concessions covering up to 625,000 vehicles, a figure calibrated to reflect the relative sizes of the two markets.
Tariffs on India-made electric vehicles imported into the EU within agreed quotas will be eliminated over 10 years. Smaller and lower-cost EVs will be phased in more gradually over 14 years, starting with 27,500 units in year five and rising to 125,000 units, equivalent to around 2 per cent of the EU market based on current estimates.
CKD route and parts duty relief
The pact also allows European manufacturers to export up to 75,000 cars a year priced above €15,000 for assembly in India using completely knocked-down (CKD) kits. Tariffs on these imports will be reduced to 8.25 per cent from 16.5 per cent.
In addition, duties on auto components will be reduced to zero, supporting deeper supply-chain integration between India and Europe. Europe remains a key export destination for Indian auto component makers, while higher pricing of EU-made parts is expected to limit disruption to domestic manufacturing.
Review clause and strategic trade reset
The agreement includes a review clause that allows import quotas to be reassessed periodically, reflecting growth in India’s auto market and any concessions offered to future trade partners, including the US. These reviews will be linked to steel, a sector of strategic importance to India, providing leverage for both sides in future negotiations.
While the pact stops short of fully liberalising the car market, analysts said it represents a major reset in India–EU trade relations. For Europe, it offers long-sought access to a high-growth market. For India, it provides reciprocal access to the EU while supporting its broader goals of boosting exports, strengthening manufacturing, and integrating more deeply into global automotive supply chains.
However, the real impact will depend on the pace of tariff reductions and whether demand in India’s premium and electric vehicle segments grows as anticipated over the coming years.
