The lower-duty windows will help European car makers understand consumer appetite and operational viability
| Photo Credit:
Milan Jaros
“The Europeans have indicated that it would be very difficult for them to compete in the automobile market in India with products made in Europe. They needed quotas to sell small quantities to test the Indian market and see if it works for them. This will help them decide on setting up their plants here,” an official tracking the matter closely told businessline.
Demand pulse
These lower-duty windows will help EU car manufacturers gauge consumer appetite and operational viability before committing to large-scale investments in local manufacturing facilities, the official added.
Under the terms of the landmark deal finalised in January 2026, the import duties on completely built units (CBUs) will see an immediate drop from the current 70–110 per cent to an initial rate of 30–35 per cent (or 40 per cent in some categories) upon the pact’s implementation. This rate will then be phased down over a 5-10 year period to 10 per cent. These concessions are strictly limited to a combined annual quota of 2.5 lakh vehicles and are subject to a minimum price floor of €15,000 (approximately ₹15 lakh approx).
Vehicles falling below this price threshold are entirely excluded from the deal. “The price cap ensures that the high-volume, small-car segment, dominated by Maruti Suzuki, Tata Motors, and Mahindra, remains protected,” another source noted.
While traditional internal combustion engine (ICE) and hybrid vehicles are set for immediate tariff relief, the agreement includes a strategic “lock-in” period of five years for the electric vehicle (EV) sector to protect India’s growing domestic ecosystem.
Under the provisions, battery electric vehicles (BEVs) are strictly excluded from duty concessions for the first five years following the pact’s implementation, maintaining current tariffs of up to 110 per cent until at least 2031. This will give local companies, such as Tata Motors and Mahindra, as well as firms benefiting from the government’s production linked incentive (PLI) schemes, more time to scale their battery manufacturing and supply chains.
Talks with car makers
“Before finalising the specificities of the deal, the government had detailed discussions with both the European car industry as well as Indian manufacturers. Initially, SIAM (Society of Indian Automobile Manufacturers) was apprehensive. But with so many safeguards, they are now all satisfied,” the official said.
The India-EU FTA is likely to be implemented by early 2027 after all approvals are secured in the two countries including the European Parliament.
Published on March 8, 2026