Cars from EU are about to become cheaper in India
What's the story
India has agreed to reduce import tariffs on European cars from a whopping 110% to as low as 10%. The reduction will be implemented under a free trade agreement (FTA) with the European Union (EU). The deal also includes a plan to abolish duties on car parts within five to 10 years, the European Commission said in an official statement.
Quota
Tariff reduction to be implemented with annual quota
The tariff reduction on cars will be implemented with an annual quota of 2,50,000 vehicles. This move is expected to give a major boost to European automakers in India, the world's third-largest passenger vehicle market and one of the fastest-growing large economies. Currently, imported fully-built passenger cars attract a customs duty of up to 110% depending on their value.
Market impact
It will benefit luxury carmakers
The tariff reduction is expected to benefit top luxury carmakers such as Mercedes-Benz, BMW, Audi, and Jaguar Land Rover. These companies already have assembly plants in Maharashtra and Tamil Nadu where they manufacture cars using CKD kits. In 2024, EU exports of motor vehicles to India were valued at €1.6 billion.
Export projections
EU exports to India expected to double by 2032
The FTA is expected to cut trade barriers on 96.6% of EU goods exports to India, with total tariff savings on European products estimated at around €4 billion per year. The European Commission expects EU goods exports to India to double by 2032 as a result of the agreement. It is expected that this deal will significantly boost India's economic growth and create job opportunities in various sectors.