India-EU FTA Explained: Will European luxury cars get cheaper in India?

However, that may not entirely be the case.

Will European cars get cheaper by much in India?

To understand the answer to this question, it is important to first contend with the duty structure on cars sold in India. The headline tariff deflation from 110% to 10% (over a period of time) only applies to completely built units, or CBUs. These cars are not made in India and are entirely imported from elsewhere. The duty reduction does not, or rather cannot, apply to cars assembled in India, which constitute more than 90% of the European cars currently sold in the country. These cars, called completely knocked down, or CKD, units are assembled in India locally, and only kits are imported. The duty on importing CKDs is around 16-17% currently.

So, for brands like Mercedes, Audi and BMW, their cars might not be cheaper by much, or at all, as those cars are anyway not paying the high 110% tariff but the 16-17% duty, since they import cars in the CKD state and later assemble them in India. Some reports suggest that the 16-17% tariff on CKDs could also be slashed by half due to the FTA, but official confirmation is awaited.

Santosh Iyer, MD & CEO, Mercedes-Benz India said, “With more than 90% of Mercedes-Benz India’s sales volume comprising ‘Made in India’ locally manufactured models, and only ~5% of sales coming via CBU imports from EU, we do not foresee any price reduction for Mercedes-Benz vehicles from the FTA, in the foreseeable future”.

Balbir Singh Dhillon, brand director, Audi India, said, “Any implications for pricing and market can only be assessed once the final terms are available and carefully reviewed, including the timeframe of implementation. Until then, it would be premature to draw conclusions on specific commercial or product strategies”.

The cars which might see some price cuts are the ultra high-end offerings from brands like Porsche, Lamborghini or Ferrari, since they are not made or assembled in India, but are imported into the country. Some specific models from more mass-market brands like Volkswagen Golf GTI, or Skoda Octavia RS might also be imported into India at a more affordable price point. It is worth remembering that for the high-end luxury end of the market, price deductions don’t happen simply as a matter of tariff reductions, as the sticker price is often a way to signal the premium positioning of the car.

An industry source also said that the Rupee’s depreciation compared with the Euro could play spoilsport in imported cars getting cheaper in the near-term. “Rupee depreciated by 19% in 2025 compared with Euro, and this is expected to erode any benefit arising from lower duty import for CBU’s in the next couple of years,” a senior industry executive said.

A win nonetheless

That India and EU have agreed to formalise a trade deal, amid geopolitical headwinds and as the US tiptoes around a FTA with New Delhi, could in itself serve as a strong signal. The FTA between India and EU has reached its conclusion after decades of conversations and negotiations and breakdown of talks.

As The Indian Express explained earlier, the first round of India-EU trade talks was initiated in 2007. By October 2013, New Delhi and Brussels had exchanged offers on tariffs and services, and were focusing on identifying the outlines of a possible agreement for the tricky market-access component of the FTA.

The most politically sensitive topic from India’s perspective at that time was tariffs on car and car parts. By the time landing-zone negotiations started, Indian elections were looming and Prime Minister Manmohan Singh’s government was facing political headwinds.

So, in the case of the automotive segment, which was the dealbreaker last time, there’s been quite a lot of play by both sides on the “complementary factors” — that India is strong in small and cheaper cars and European is strong in bigger vehicles.