India’s luxury and performance car market is set for a structural shift after the official announcement of the India–European Union Free Trade Agreement (FTA). As part of the pact, India has agreed to grant the EU tariff concessions that none of its other trading partners currently enjoy, including a phased reduction in import duties on cars from as high as 110 per cent to as low as 10 per cent. The move is expected to directly affect the pricing of fully imported European vehicles sold in India, particularly in the luxury and performance segments.
How import duties will change under the FTA
Until now, fully built-up (CBU) cars imported from Europe were subject to one of the world’s highest automotive tariff regimes. These vehicles attracted 70 per cent Basic Customs Duty (BCD), 40 per cent Agriculture Infrastructure Development Cess (AIDC), along with 28 per cent IGST and compensation cess. In effect, this pushed total taxation to around 140–170 per cent of a car’s CIF (Cost, Insurance and Freight) value.
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Under the India-EU FTA, import tariffs on cars will be reduced in stages. In the first phase, duties are expected to drop sharply to around 40 per cent for eligible EU-made vehicles, followed by GST and cess. Over the longer term, tariffs on cars will continue to decline gradually, eventually falling to as low as 10 per cent, a level not offered to any of India’s other trading partners.
Separately, the agreement also provides for a complete abolition of import duties on car parts within a five- to ten-year timeframe, a move that could further reshape cost structures for European automakers operating in India.
What this means for car prices
{{/usCountry}}Separately, the agreement also provides for a complete abolition of import duties on car parts within a five- to ten-year timeframe, a move that could further reshape cost structures for European automakers operating in India.
What this means for car prices
{{/usCountry}}The initial reduction to a 40 per cent duty itself is expected to bring the total effective tax burden down to roughly 70–90 per cent, translating into a potential 40–50 per cent reduction in prices compared to today’s levels.
For context, a European car with a CIF value of around ₹1 crore currently retails at close to ₹3 crore ex-showroom in India. Under the revised tariff framework, such vehicles could see a significant correction in pricing, with further reductions possible as duties continue to taper over the coming years.
Which cars are likely to get cheaper?
The tariff cuts will apply initially to a quota of up to two lakh cars per year. In the early stages, the benefit will be limited to petrol and diesel vehicles, while electric vehicles are excluded from the agreement for the first five years.
As a result, fully imported models from brands such as Mercedes-Benz, BMW, Audi, Porsche, Lamborghini, Ferrari, Bentley, Rolls-Royce, Land Rover, Volvo, Volkswagen and Skoda are expected to benefit. This includes flagship luxury SUVs, performance sedans and sports cars, as well as lower-volume performance models such as the Volkswagen Golf GTI and Skoda Octavia vRS.
Expected price impact on European imports
| Model | Current Ex-showroom Price | Expected Price Post FTA |
|---|---|---|
| Mercedes-Benz G-Class | ₹2.90 – 4.00 crore | ₹2.00 – 2.70 crore |
| Land Rover Defender 130 | ₹1.70 – 2.00 crore | ~ ₹1.15 crore |
| Porsche 911 | ₹2.00 – 3.80 crore | ₹1.30 – 2.60 crore |
| BMW i7 | ₹2.03 crore | ~ ₹1.40 crore |
| Audi RS Q8 | ₹2.32 crore | ~ ₹1.60 crore |
| Range Rover | ₹2.60 – 4.17 crore | ₹1.80 – 2.90 crore |
| Rolls-Royce Ghost | ₹6.95 – 7.95 crore | ₹4.80 – 5.50 crore |
| Bentley Bentayga | ₹4.10 crore | ~ ₹2.80 crore |
| Lamborghini Urus | ₹4.18 crore | ~ ₹2.90 crore |
| Ferrari Purosangue | ₹10.50 crore | ~ ₹6.30 crore |
Note: Prices mentioned above are indicative estimates based on revised import duty structures. Actual ex-showroom prices will depend on manufacturer decisions, market conditions and the final implementation framework of the India-EU FTA.
Will manufacturers pass on the full benefit?
Despite the scale of tariff reductions announced, lower duties do not automatically translate into proportionate price cuts for buyers. Automakers retain complete control over pricing and may choose to pass on the benefits selectively.
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Factors such as global supply constraints, geopolitical uncertainties, currency fluctuations and brand positioning are expected to influence final pricing decisions. Limited-production and high-demand models, in particular, may see smaller or delayed revisions. The long-term removal of duties on car parts, however, could gradually improve cost efficiencies, especially for brands with local assembly operations.
What this means for the Indian market
With tariffs on cars set to fall steadily to 10 per cent and duties on car parts to be fully eliminated over the next decade, the India-EU FTA represents one of the most far-reaching policy shifts for India’s automotive sector. While immediate price drops may be uneven, the agreement is likely to make European luxury and performance cars significantly more competitive in the Indian market over time.