The Free Trade Agreement (FTA) between India and the European Union (EU) has been finalised. Under this agreement, tariffs on cars produced in Europe will be reduced from 110 percent to 10 percent. However, this reduction will be available only within a fixed limit of 250,000 vehicles per year. The agreement follows nearly two decades of negotiations between the two countries.
Under the agreement, tariffs on European cars will be gradually reduced from 110 percent to 10 percent, subject to a cap of 250,000 vehicles annually. Currently, imported passenger cars priced below $40,000 (approximately ₹36.7 lakh) are subject to a basic customs duty of 70 percent, while cars priced above $40,000 are subject to a total customs duty of up to 110 percent.
Key points of trade agreements
Under the trade deal, only cars priced above Rs 25 lakh will be discounted. Duty on cars will be reduced only to a certain number. Its limit has been kept at 2.5 lakh units per year. The good thing is that the EU will provide two and a half times the car quota to India. India will not give concession on bus imports from Europe. Truck imports from Europe will be exempted under quota. More quota has been given to expensive cars. A limit of Rs 25 lakh has been imposed on all types of taxes on EVs, Petrol-Diesel. Due to this, cheaper cars will not benefit from the duty cut.
The vehicles of these companies will be cheaper
Under this agreement, tariffs on cars produced in the European Union will be reduced to around 10 percent. This will enable companies like Volkswagen, BMW, Mercedes-Benz, Audi, Porsche, Maserati, Skoda and Volvo to expand their business in India's fast-growing car market. Following this agreement, many high-performance and luxury models from Germany's three major car companies could become cheaper than before.
India-EU trade
India-EU trade is projected to total over $190 billion in 2024-25. India exported $75.9 billion in goods and $30 billion in services to the EU, while the EU exported $60.7 billion in goods and $23 billion in services to India. India is the world's third largest car market in terms of car sales, after the US and China, but its domestic auto industry is considered one of the most secure. Currently, India imposes tariffs ranging from 70 percent to 110 percent on imported cars. The high tariffs have been criticized by leading industry figures, including Tesla CEO Elon Musk.
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