After a years-long bout of negotiations, India and the European Union (EU) are reportedly close to announcing a landmark Free Trade Agreement (FTA). Under the terms of this FTA, cars built in Europe that qualify for certain criteria would see an immediate drop in import duties when sold in India – from up to 110 percent to 40 percent – with more reductions planned in the coming years. India signed a similar FTA with the UK last year.
Reporting from Reuters suggests that the Indian government has agreed to immediately scale back duties on European-manufactured cars, among other commodities. The announcement of the India-EU FTA may come as early as Tuesday, January 27.
Thanks to this FTA, import tariffs on limited quantities of EU-made cars priced above €15,000 (Rs 16.28 lakh) will come down to 40 percent from the prior ceiling of 110 percent. Over the coming years, these duties are expected to be further lowered to 10 percent.
Interestingly, these import duty reductions will go into effect for ICE-powered cars immediately, but not EVs. The tariff rates on imported European EVs will remain unchanged for the first five years after the FTA is finalised and ratified, with reduced import duties being levied only after that point. This limitation is supposedly being enforced to protect Indian EV makers like Mahindra and Tata.
Expectedly, the India-EU FTA will benefit European carmakers. Luxury brands like BMW, Audi, Volvo, and Mercedes-Benz assemble lots of their models in India via the CKD route, so they already qualify for lower duties. However, performance offerings from the BMW M, Mercedes-AMG, and Audi RS divisions might see price reductions. Even the Land Rover Defender could see a price drop in India, since it's imported from Slovakia.
Expect Ferrari, Lamborghini, Maserati, and Porsche cars to become more affordable in India too. Mass-market European carmakers like Volkswagen and Skoda should also benefit from the India-EU FTA, with the path for importing their models now more accessible.
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