Porsche, Mini Cooper… :European cars to get cheaper in India as FTA cuts tariffs from 110% to 10%

A wider range of European marques could soon get cheaper for Indian buyers after New Delhi and the European Union reached a free trade agreement on Tuesday.

Under the agreement, India will gradually slash tariffs on imported cars from 110 per cent to as low as 10 per cent, according to details released by the European Commission. The duties on auto components will be eliminated entirely over a five-to-ten-year period.

European luxury cars, such as Volkswagen, BMW, Mercedes-Benz, Renault and Stellantis, are set to become cheaper in the Indian market once the bilateral free trade agreement comes into force, likely next year.

Closer trade ties between India and the European Union will reinforce French carmaker Renault’s decision to invest in both regions, chief growth officer Fabrice Cambolive told Reuters on Tuesday.

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“Strategically, it shows the direction and this capacity to work closer between Europe and India is for us, a good news, because we are a company which has bet on these two continents on a very high level,” he said, adding that, “It will reinforce our willingness to invest on both continents because we are kind of Indian and European company.”

Two decades of talks end in breakthrough deal

India and the EU signed a long-awaited free trade agreement, bringing to a close nearly two decades of negotiations marked by repeated breakdowns, geopolitical shifts and tough political trade-offs on both sides.

The pact, seen as one of the most ambitious trade agreements ever entered into by India, is expected to significantly deepen economic ties between New Delhi and Brussels at a time when both are looking to diversify supply chains and reduce exposure to global shocks.

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The EU will eliminate duty in a phased manner for Indian automobiles, whereas India will reduce the levies to 10 per cent for specified numbers.

“Tariffs on cars will gradually go down from 110% to 10% with a quota of 250,000 vehicles a year,” the European Commission said.

Auto tariffs cut on quota basis

As per the agreement, India and the EU have negotiated on a “quota” based duty concessions, a commerce ministry official told Press Trust of India, adding that the EU has a “very” aggressive demand for this sector.

India also protects its auto industry strongly, as the sector is growing at a faster pace and is a major employment creator. It is one of the core areas in the ‘Make in India’ initiative of the government.

“The EU has got a very well laid out auto industry, one of the most advanced auto industries, and their cars are one of the best, and it is a reality,” the official told PTI.

“Taking note of sensitivity on both sides, we have agreed to a quota-based ecosystem, wherein we are trying to take care of each other’s sensitivities,” he said.

Manufacturing push beyond quota limits

India will not give any out-of-quota duty reduction, as it wants the EU firms to look at the possibility of manufacturing in India.

“The idea is that beyond quota, if your market grows, you come and build it here, as India is a growing market,” the official said.

“We would like European car manufacturers to test this market, come here, and if they find this market good, they set shops here, which will be win-win again, because they will not do 100 per cent on capital. They will have their supply chains from the EU. So, you will have some bit of value-add, we will have some bit of value-add,” the official told PTI.

With inputs from agencies.