India and the European Union (EU) have finalised a long-awaited Free Trade Agreement (FTA) after nearly two decades of negotiations. This landmark deal is expected to significantly impact the automobile sector, with import tariffs on cars manufactured in Europe set to drop from 110% to just 10%.
As per the agreement, India will allow the import of up to 2.5 lakh European cars annually at the reduced tariff rate. This quota-based approach means that only a limited number of vehicles will benefit from the lower tax, ensuring that the price reduction applies to select models rather than the entire range of European imports.
Several renowned European car manufacturers, including Volkswagen, Audi, Porsche, Skoda, Mercedes-Benz, BMW, Stellantis, Renault, and Volvo, stand to gain substantially from this tariff cut. While these companies already have local manufacturing operations in India, the high import duties previously limited the availability of certain models. The new FTA will enable them to expand their offerings with more imported variants at competitive prices.
However, the agreement excludes electric vehicles (EVs) from tariff reductions. European electric cars will continue to attract the existing customs duties, a decision aimed at protecting and promoting the domestic EV industry.
Currently, European car brands hold less than 4% of the Indian automobile market. Industry experts anticipate that the FTA will gradually increase this share as more affordable imported models become accessible. India is the world’s third-largest car market after the United States and China, with annual vehicle sales projected to reach 60 lakh units by 2030.
The FTA is also expected to boost overall trade between India and the EU, which stood at $136 billion in the fiscal year 2024-25. India’s exports to the EU were valued at $76 billion, while imports totalled $60 billion. As global trade dynamics shift—with the US raising tariffs and China imposing stricter export controls—India and the EU are seeking to deepen economic ties and open new market opportunities.
Prime Minister Narendra Modi described the agreement as the “mother of all deals,” highlighting its potential to strengthen investor confidence in India. He emphasised that the partnership between two of the world’s largest economies, accounting for approximately 25% of global GDP, will have far-reaching economic benefits.
My name is Ganpat Singh Choughan. I am an experienced content writer with 7 years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.
Leave a Comment