India-EU FTA to expand luxury car market in India
Tariffs on European luxury cars will gradually go down from 110% to 10% with a quota of 250,000 vehicles a year
- Jan 27, 2026,
- Updated Jan 27, 2026 4:52 PM IST
The India-EU free trade agreement is set to give a big boost to European luxury carmakers in India as tariffs on cars will gradually go down from 110% to 10% with a quota of 250,000 vehicles a year.
“If customs duties on completely built units are reduced, it would help expand the luxury car market in India,” says Hardeep Singh Brar, President and CEO, BMW Group India.
While completely built-up units (CBUs) currently account for about 5% of BMW’s India sales, the India-EU FTA would allow it to broaden its product portfolio and introduce globally popular models and test new offerings, Brar adds.
“There is a strong and positive signal of confidence in India’s long term growth story. India today is not just a large market, but a future ready economy backed by reforms and policies focused on building a globally competitive ecosystem. The India EU Free Trade Agreement would be a historic milestone benefiting both sides by expanding trade and enabling deeper exchange of technology and innovation,” says Brar.
Allaying fears that the trade agreement would hit homegrown mass market automakers, Brar says given that luxury vehicles form only about 1% of the passenger vehicle market in India, this would benefit consumers without impacting mass market players, making it a genuine win-win for both India and the EU.
“From an automotive industry perspective we hope the FTA will include balanced, win-win provisions that help stimulate demand in the luxury segment while strengthening supply chain integration which is especially important in the current geopolitical context,” says Brar. “If demand scales up, it could also support deeper localisation over time,” he adds.
India’s biggest luxury carmaker, Mercedes-Benz, said the India-EU FTA will have a positive cascading effect on customer sentiments for the luxury segment, with boost in overall economic growth. “A gradual tariff reduction on vehicles and fully liberalised automotive parts are strategically important decisions in the FTA for the automotive industry,” says Santosh Iyer, MD & CEO Mercedes-Benz India.
“The FTA opens up new avenues for customers with improved vehicle allocations, better availability of top-end global models for Indian market, faster access to latest technology and creating a stronger luxury car ecosystem,” the country’s biggest luxury automaker said.
However, Mercedes-Benz said it continues to value add with local production of models from its Indian manufacturing plant in Pune.
To be clear, locally assembled cars attract basic customs duty of around 16.5% while imported vehicles from EU attract up to 110% duty. The FTA is likely to come into effect only by mid-2028, owing to time taken for required legal, multi-level ratification, and detailed implementation.
The depreciated of the Indian rupee by 19% in 2025 compared to Euro is expected to erode any benefit arising from lower duty import for CBU’s in next couple of years, said Mercedes-Benz India.
Balbir Singh Dhillon, Brand Director, Audi India, too, welcomed the proposed Free Trade Agreement (FTA) between India and the European Union and its potential to deepen economic ties with one of the world’s largest trading blocs. “This constructive approach to trade could support the broader automotive ecosystem, including innovation, supply-chain efficiency, and technology collaboration. That said, any implications for pricing & market can only be assessed once the final terms are available and carefully reviewed, including the timeframe of implementation,” said Dhillon.
“Until then, it would be premature to draw conclusions on specific commercial or product strategies. We are positive that India-EU FTA will create a stable and predictable environment for European automakers to invest, innovate, and better serve Customers in India,” he added.
The India-EU free trade agreement is set to give a big boost to European luxury carmakers in India as tariffs on cars will gradually go down from 110% to 10% with a quota of 250,000 vehicles a year.
“If customs duties on completely built units are reduced, it would help expand the luxury car market in India,” says Hardeep Singh Brar, President and CEO, BMW Group India.
While completely built-up units (CBUs) currently account for about 5% of BMW’s India sales, the India-EU FTA would allow it to broaden its product portfolio and introduce globally popular models and test new offerings, Brar adds.
“There is a strong and positive signal of confidence in India’s long term growth story. India today is not just a large market, but a future ready economy backed by reforms and policies focused on building a globally competitive ecosystem. The India EU Free Trade Agreement would be a historic milestone benefiting both sides by expanding trade and enabling deeper exchange of technology and innovation,” says Brar.
Allaying fears that the trade agreement would hit homegrown mass market automakers, Brar says given that luxury vehicles form only about 1% of the passenger vehicle market in India, this would benefit consumers without impacting mass market players, making it a genuine win-win for both India and the EU.
“From an automotive industry perspective we hope the FTA will include balanced, win-win provisions that help stimulate demand in the luxury segment while strengthening supply chain integration which is especially important in the current geopolitical context,” says Brar. “If demand scales up, it could also support deeper localisation over time,” he adds.
India’s biggest luxury carmaker, Mercedes-Benz, said the India-EU FTA will have a positive cascading effect on customer sentiments for the luxury segment, with boost in overall economic growth. “A gradual tariff reduction on vehicles and fully liberalised automotive parts are strategically important decisions in the FTA for the automotive industry,” says Santosh Iyer, MD & CEO Mercedes-Benz India.
“The FTA opens up new avenues for customers with improved vehicle allocations, better availability of top-end global models for Indian market, faster access to latest technology and creating a stronger luxury car ecosystem,” the country’s biggest luxury automaker said.
However, Mercedes-Benz said it continues to value add with local production of models from its Indian manufacturing plant in Pune.
To be clear, locally assembled cars attract basic customs duty of around 16.5% while imported vehicles from EU attract up to 110% duty. The FTA is likely to come into effect only by mid-2028, owing to time taken for required legal, multi-level ratification, and detailed implementation.
The depreciated of the Indian rupee by 19% in 2025 compared to Euro is expected to erode any benefit arising from lower duty import for CBU’s in next couple of years, said Mercedes-Benz India.
Balbir Singh Dhillon, Brand Director, Audi India, too, welcomed the proposed Free Trade Agreement (FTA) between India and the European Union and its potential to deepen economic ties with one of the world’s largest trading blocs. “This constructive approach to trade could support the broader automotive ecosystem, including innovation, supply-chain efficiency, and technology collaboration. That said, any implications for pricing & market can only be assessed once the final terms are available and carefully reviewed, including the timeframe of implementation,” said Dhillon.
“Until then, it would be premature to draw conclusions on specific commercial or product strategies. We are positive that India-EU FTA will create a stable and predictable environment for European automakers to invest, innovate, and better serve Customers in India,” he added.