India-EU FTA to cut auto import duties? Here’s what we know

The proposed free trade agreement (FTA) between India and the European Union is expected to reduce import duties on automobiles, including electric vehicles (EVs), from the 27-nation bloc to 10-15 per cent. This move could lead to a rise in European luxury EV sales in India, according to a report.

The deal, anticipated to be announced at the bilateral summit on January 27, is also expected to position India as an attractive manufacturing hub for luxury EVs, according to a report in The Economic Times. Currently, India imposes an import duty of around 100 per cent on European automobiles with a landed cost above $40,000 (approximately Rs 37 lakh). This levy applies to luxury EVs, which typically start at Rs 1 crore.

With the FTA likely to reduce import duties, European luxury EV makers may price their products more competitively in the Indian market. However, Santosh Iyer, managing director and CEO of Mercedes-Benz India, noted that the company’s sales in India are locally manufactured. He added that import duty cuts might lead to significant price reductions and that India remains an export hub for Mercedes-Benz to the EU and global markets.

The FTA is expected to include provisions that balance market access with protection for domestic manufacturers such as Tata Motors and Mahindra & Mahindra. Phased localisation requirements and value-addition norms for EV makers are likely to continue, ensuring that increased imports do not affect India’s long-term manufacturing goals.

Premium European manufacturers are also expected to benefit from new regulations on digital value addition, battery passports, and software-led manufacturing. The FTA is likely to set standards for battery passports, which are digital records of a battery’s lifecycle, aligning with European climate goals and supporting sustainable mobility.

Battery electric vehicles accounted for 10.7 per cent of the luxury segment’s powertrain mix between January and November 2025, compared with 4.5 per cent for mass-market manufacturers, according to Jato Dynamics data.