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India and the European Union have finalized a long-awaited Free Trade Agreement that significantly reduces import tariffs on European cars. Under the deal, duties will be cut from up to 110% to nearly 10% on a limited annual quota.
European Luxury Cars to Become Affordable in India After FTA
New Delhi: The long-running Free Trade Agreement (FTA) negotiations between India and the European Union (EU) have finally concluded. This agreement, reached after nearly two decades, is being considered historic. Under this deal, the hefty tariff on European-made cars will be reduced from 110 percent to approximately 10 percent. This could make luxury and high-performance cars in India much cheaper than before.
According to the agreement, tariffs on European cars will be reduced in a phased manner. However, this relief will only be available up to a fixed limit of 250,000 vehicles per year. Currently, imported passenger cars in India priced under $40,000 (approximately ₹36.7 lakh) are subject to a 70 percent basic customs duty, while cars priced over $40,000 are subject to a total duty of up to 110 percent. After the FTA is implemented, this duty will be reduced to approximately 10 percent.
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This trade deal will only benefit cars priced above ₹2.5 million. Lower-priced cars will not benefit from the duty cut. A limit of 2.5 million units per year has been set, meaning cars above the specified number will remain subject to the old rates. Significantly, higher quotas have been allocated to high-end cars. A minimum price limit of ₹2.5 million has been set for all types of cars—electric, petrol, and diesel.
This agreement will significantly benefit European companies like Volkswagen, BMW, Mercedes-Benz, Audi, Porsche, Maserati, Skoda, and Volvo. In particular, many models from Germany's leading luxury car companies could become more affordable in India than before. This will provide Indian customers with more options in the premium segment.
Total trade between India and the EU will exceed $190 billion in 2024-25. India exported goods worth $75.9 billion and services worth $30 billion to the EU, while the EU exported goods worth $60.7 billion and services worth $23 billion to India. India is the world's third-largest car market, but until now, imported cars were very expensive due to high tariffs.
While this deal will benefit consumers, it could also pose a challenge to the domestic auto industry. Many global businesses, including Tesla CEO Elon Musk, have already criticized the high tariffs. Now, it remains to be seen where this agreement leads the Indian auto sector.
