India-EU Free Trade Agreement 2026: The Free Trade Agreement (FTA) between India and the European Union (EU) is expected to make cars cheaper in India, thanks to significant reductions in import fees.
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India-EU Free Trade Agreement 2026: Who Will Benefit?
This reduction will especially benefit the traditional and genuine car companies of Europe. This will particularly benefit luxury cars priced above ₹25 lakh. However, the number of imported cars will be limited. Domestic car companies need not worry much after this agreement.
Under the India-EU Free Trade Agreement 2026, rules have been established that will allow only 7-8 traditional European car companies to take advantage of the exemptions. The companies that will benefit from this agreement include: BMW, Mercedes-Benz, Audi, Skoda-Volkswagen, Stellantis (including brands such as Citroën, Fiat and Jeep), Volvo and Renault.
Indian Officer Statement: Indian officials said the rules have been designed in such a way that non-European companies cannot misuse them.
No More Than 3 Lakh Cars will be imported.
India has set an annual quota for cars imported from the European Union (EU). Upon full availability, this quota will amount to 160,000 diesel and petrol cars and 90,000 electric vehicles (EVs). The total quota will start at 100,000 units in the first year, increase to 200,000 in the 10th year, and reach 250,000 in the 14th year. Under no circumstances will the total number of cars imported exceed 300,000.
How will Import Duty be Reduced Year After Year?
The duty on petrol and diesel cars will be reduced from 110% to 30-35% in the first year. This will further decrease to 10% by the 10th year. However, the exemption on electric cars will begin from the fifth year, thus ensuring that India’s nascent EV market remains unaffected.
The India-EU Free Trade Agreement 2026 will likely lead to a decline in the prices of luxury cars, especially those models that are currently expensive imports. Currently, most cars are assembled in India by automakers.
Luxury Cars Assembled in India Will Be Cheaper
Luxury car companies like BMW and Mercedes say that more than 90% of cars sold in India are locally manufactured. The duty on completely knocked-down (CKD) kits will be halved, dropping from 16.5% to around 8%. This will make luxury cars assembled in India more affordable. According to official reports, companies will initially use the import route to test new models. As sales increase, local assembly will be expanded.
India-EU Free Trade Agreement 2026: India will get more Benefits in the EU
The FTA between India and the European Union will provide India with increased benefits within the EU. The EU will provide India with a quota that is two and a half times larger. India will receive a quota of 625,000 vehicles for cars priced up to 50,000 euros.
Under the agreement, duties on auto parts will be reduced to zero by the 10th year, creating a supply chain within India and driving value addition. This agreement will benefit luxury car buyers. But the prices of non-luxurious cars will remain unchanged.
PM Modi Flags India’s ‘Reform Express’ Approach Ahead Of Budget 2026 Announcement
— Mint (@livemint) January 29, 2026
Prime Minister Narendra Modi said on Thursday that India was already onboard the reform express while hailing the recently sealed India-EU Free Trade Agreement.
“This government has been… pic.twitter.com/9O0xAJB1XG
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