India and the European Union have finally signed a long awaited free trade agreement, and for the auto industry, it is a big moment. After years of talks, the deal is now real and it brings a definite change in the way European cars will be priced in India.
For buyers, this agreement means one simple thing. Imported European cars will become cheaper in time.
Till now, the cars brought into India as fully built units from Europe were taxed very heavily. Import duties ranged from 70 percent to as high as 110 percent. Under the new agreement, this will change.
For European cars priced above around Rs 16.3 lakh, import duty will gradually go down to 10 per cent. This benefit will apply to a limited quota of 2.5 lakh cars every year. The reduction will happen in phases over five years, not overnight.
Key changes under the India EU FTA include
- Import duty on European CBUs to bring down from up to 110 percent to 10 percent
- Only petrol and diesel cars benefit immediately
- Electric vehicles will experience similar cuts after 5 years
- Duties on auto components will be removed in five to ten years
This is good news mainly for high end European cars. Brands such as Ferrari, Lamborghini and Porsche will see significant corrections in prices. Performance models such as AMG, BMW M and Audi RS cars will also benefit the most.
Mass luxury brands such as Mercedes Benz, BMW, Audi, Volvo and Jaguar Land Rover already assemble most of their cars in India. For them the greater benefit will accrue in the future, when import duties on components are lifted. That will help in reducing the cost of CKD.
However, there is one catch. The Indian Rupee weakened sharply against the Euro in 2025. This could eat up some of the price benefit over time.
The agreement took almost 20 years to complete. Talks have been going on since 2007, but stopped in 2013 and resumed in 2022. Final negotiations were completed in late 2025. The FTA is expected to come into force around mid 2028 after approvals.
Overall, this deal will not flood the market with cheap imports. But it does open the door to more choice, stronger competition and a gradual shift in the way European cars are priced in India.