Europe will be sharply reduced. The duty, which was earlier 110%, will now come down to just 10%, but only under certain conditions.
Big Reduction in Import Tax on Cars
As per the India–EU trade deal, India will allow only 250,000 European cars per year to be imported at the lower tax rate. These cars will attract an import duty of 10% instead of 110%.
This limit means that not all European cars will become cheaper in India. Only a fixed number of cars will benefit from this reduced tax, so the impact will be controlled and gradual.
No Tax Relief for Electric Vehicles
One important part of the agreement is that electric vehicles (EVs) are not included in the tax reduction. European electric cars imported into India will continue to face high duties and remain expensive.
This move is seen as a way to protect and support India’s domestic electric vehicle industry.
European Car Makers to Gain
The deal is expected to benefit several European car companies such as Volkswagen, Renault, Stellantis, and luxury brands like Mercedes-Benz and BMW.
Although many of these companies already manufacture vehicles in India, high import taxes have limited the number of foreign-made models they could bring in. The lower duty will make it easier for them to offer more options in the Indian market.
India’s Car Market Set to Expand
At present, European car makers hold less than 4% of India’s total car market. This could slowly change after the FTA.
India is already the third-largest car market in the world, after the US and China. By 2030, annual car sales in India are expected to reach 6 million units.
Seeing this growth potential, Renault is planning a fresh return to India with a new strategy, while the Volkswagen Group is preparing new investments through its Skoda brand.
Boost to Overall India–EU Trade
In the financial year 2024–25, total trade between India and the EU stood at $136 billion. India exported goods worth $76 billion, while imports from the EU were $60 billion.
The EU remains India’s largest trading partner. This FTA comes at a time when the US is increasing tariffs and tightening trade rules with China, pushing both India and the EU to explore new markets.
PM Modi Calls It the “Mother of All Deals”
Prime Minister Narendra Modi described the India–EU FTA as the “mother of all deals.” He said the agreement would boost global investor confidence in India.
He also highlighted that the deal links two major economies that together contribute about 25% of the world’s GDP.
