Mother of all deals! Will India–EU FTA lower luxury car prices?

India and the European Union have finally wrapped up negotiations for a long-pending Free Trade Agreement. This move that could eventually make European luxury cars significantly more affordable in India. Under the pact, import duties on EU-made cars will be reduced sharply from the current peak level of up to 110 per cent to as low as 10 per cent over time.

That said, there will be no immediate impact on car prices. The agreement still needs to come in affect, and the duty cuts will be rolled out in phases. As a result, buyers should not expect instant price drops at dealerships, with the real benefits likely to be felt only after the agreement comes into force, which can be expected sometime next year, reported IANS.




Once implemented, premium European brands such as BMW, Mercedes-Benz, Audi, Porsche and Lamborghini stand to gain the most. As per the agreement, the lower import duty will apply to up to 250,000 vehicles annually. At present, India levies a 70 per cent customs duty on imported passenger cars priced below $40,000, while cars costing more than $40,000 attract an effective duty of around 110 per cent.



The tariff reduction will not happen overnight. In the first phase, duties on eligible EU-made cars are expected to fall to around 40 per cent, after which GST and compensation cess will continue to apply. Even this initial cut could bring the total tax burden down to roughly 70–90 per cent, potentially translating into a 40–50 per cent reduction in prices compared to current levels. Over the longer term, tariffs will be reduced further in stages, eventually settling at around 10 per cent.

In the early years of the agreement, the benefits will be limited to petrol and diesel vehicles. Electric vehicles have been kept out of the deal for the first five years, as the government looks to safeguard investments made by domestic EV manufacturers.

The agreement comes at a time when India is the world’s third-largest car market after the US and China, and is projected to grow to nearly six million units annually by 2030.Discover everything about the automotive world at Times of India.