New Delhi: After nearly 20 years of negotiations, India and the European Union have finally sealed a free trade agreement (FTA). Prime Minister Narendra Modi confirmed the deal on Tuesday, sparking immediate interest among car buyers in India.
The biggest question many people are asking is simple: Will European cars finally become cheaper in India?
Why European cars are so expensive today?
Imported cars from Europe currently face some of the highest import duties in the world. Fully built cars, known as CBUs, attract taxes ranging from 70 percent to 110 percent. This is the main reason brands like BMW, Audi, Mercedes-Benz and Volvo cost much more in India than in Europe.
The new trade deal aims to change this.
What the trade deal says about car duties?
Under the India-EU FTA, India is expected to cut import duties to around 40 percent for a limited number of European cars. This will apply mainly to cars with an import value of over USD 17,700, or about Rs 16.3 lakh, according to reports.
These are the cars that currently pay the highest duties. Over time, the duty may fall further, possibly reaching 10 percent, which is closer to global levels. However, this reduction will happen gradually, not immediately.
Even the first cut is significant. A sharp drop in duty means the tax portion of the car price comes down, making imported cars clearly cheaper.
Which cars will see the biggest benefit?
The biggest price impact will be seen in the premium and luxury segments. These cars are mostly imported as fully built units. Brands such as Mercedes-Benz, BMW, Audi, Porsche, Volvo and Volkswagen stand to benefit the most.
Cars assembled in India using imported parts, called CKDs, already face lower duties. So the new tariff cuts will not change prices much for mass-market models.
What about electric cars?
European electric vehicles (EVs) are expected to stay outside the duty cuts for at least five years. India wants to protect its local EV industry, so electric models from European brands will continue to remain expensive for now.
What to watch next?
The final impact will depend on how many cars qualify, annual import limits, and how quickly duties are reduced. Carmakers will also decide how much savings they pass on to buyers.
