EU Secures Deal to Slash India's Auto Tariffs, Boosting European Carmakers' Access

The agreement opens India's long-protected auto market to more European luxury brands, but local manufacturers still dominate the mass market.

Jan. 29, 2026 at 2:31am

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India and the European Union have announced a major trade deal that will gradually reduce import duties on European cars from the current 70%-110% down to just 10%. This applies to a quota of 250,000 vehicles per year priced above 15,000 euros. The move gives a premium pass to EU automakers to enter India's fast-growing car market, the world's third largest, while U.S. companies continue to face high tariffs. However, experts say European brands will still face challenges in the price-sensitive mass market dominated by local players like Maruti Suzuki and Hyundai.

Why it matters

The deal is a significant victory for the EU in gaining better access to India's protected auto industry, edging out the U.S. which has long pushed for lower tariffs. It opens up a lucrative market for European luxury brands, but the majority of India's car sales are still in the affordable segment where local manufacturers hold a strong position.

The details

Under the agreement, India will gradually lower import duties on European cars priced above 15,000 euros from the current 70%-110% down to just 10%. This will apply to a quota of 250,000 vehicles per year. The move is expected to boost sales of premium European brands like Mercedes-Benz, BMW, Jaguar Land Rover, Audi and Volvo, which collectively sold around 49,000 cars in India in the last fiscal year out of total passenger vehicle sales of 4.3 million. However, with local taxes added, the prices of imported European cars will still exceed the sweet spot of under 2 million rupees ($21,756) where the mass market lies. Indian and Korean automakers have been rapidly expanding their presence in this segment through local manufacturing, frequent product launches and network growth, putting pressure on European brands.

  • The India-EU trade deal is likely to come into force later this year.

The players

European Automobile Manufacturers' Association

The trade body representing European car companies, which welcomed the deal while noting limitations like quota restrictions and residual tariffs.

Ashita Gupta

A New Delhi-based tech startup founder who is considering buying a high-end European car if they become more affordable under the new trade deal.

Diwaker Murugan

An auto analyst at research firm Omdia, who said the agreement could create a confrontation between European luxury brands and Indian flagship SUVs in the premium segment.

Puneet Gupta

Director of technical research at S&P Global Mobility, who said European carmakers' market share in India is "increasingly under pressure" as local and Korean brands have aggressively expanded.

Hardeep Singh Brar

President and CEO of BMW Group India, who said the free trade agreement could create opportunities to introduce new products and support deeper localization.

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What they’re saying

“EU brands now have a premium pass to the world's third largest car market, while US companies are currently facing a huge levy.”

— Diwaker Murugan, auto analyst, Omdia (CNBC)

“The free trade agreement, which is likely to come into force later this year, could make Europeans companies reassess their India business plans as trade barriers ease.”

— Puneet Gupta, director of technical research, S&P Global Mobility (CNBC)

“FTA could create opportunities to introduce new and niche products and, if demand scales, support deeper localization over time.”

— Hardeep Singh Brar, president and CEO, BMW Group India (CNBC)

What’s next

The judge in the case will decide on Tuesday whether or not to allow Walker Reed Quinn out on bail.

The takeaway

This deal highlights the strategic importance of the Indian auto market, as the EU has managed to secure better access compared to the U.S. while local manufacturers still dominate the price-sensitive mass segment. It sets the stage for increased competition between European luxury brands and Indian SUV models in the premium category.