India-EU FTA: What It Really Means For Car Buyers- Explained

India and the European Union have concluded their long-awaited Free Trade Agreement after years of negotiations, marking a significant step in trade relations. One of the most talked-about aspects of the deal is the reduction of import duties on European cars. However, the relief is not as sweeping as it might sound.  

The duty cuts apply only to completely built unit (CBU) imports, leaving out completely knocked down (CKD) kits that many luxury carmakers depend on for local assembly. This means that only fully imported cars will see price adjustments, while models assembled in India will continue under the existing duty structure. To further control the impact, the government has capped the concession at 2.5 lakh cars annually, ensuring the benefit is phased and limited.  

Currently, imported cars priced below USD 40,000 face duties of up to 70%, while those above USD 40,000 are taxed at a steep 110%. Under the FTA, these rates are expected to gradually drop to 10%, though the exact pace of reduction has not yet been disclosed. For electric vehicles, the government has taken an even more cautious stance, announcing that no duty cuts will be offered for the next five years. This reflects a deliberate effort to balance EV imports with the growth of domestic manufacturing.  

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For brands like Mercedes-Benz India, the agreement is unlikely to bring noticeable changes. Over 90% of their sales already come from locally manufactured models, with only about 5% relying on CBUs imported from the EU. As a result, the duty cuts will not translate into meaningful price reductions for their customers. The same holds true for other manufacturers who have built their business models around local assembly rather than full imports.  

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In essence, while the FTA is a landmark deal and signals progress in trade ties, its impact on luxury car pricing in India will be limited. The phased reductions, quota restrictions, and exclusion of CKD units show that the government is opening up cautiously, prioritizing protection of local industry while offering controlled relief to consumers.