The India–EU Free Trade Agreement (FTA) is expected to benefit not only Indian consumers, auto-component manufacturers, and automakers but also European OEMs seeking to diversify their sourcing away from China.
It could also position India as a preferred manufacturing destination for European OEMs, says Vivek Vikram Singh, Managing Director and Group CEO of Sona Comstar.
In an interview with Nitin Kumar, Singh added that component makers like Sona will be among the first beneficiaries, as they are already supplying to European OEMs. He noted that suppliers capable of delivering global-quality products are the ones who will stand to gain the most.
1. What will be the impact of the India–EU FTA on the auto sector?
The FTA creates a win-win for multiple stakeholders: Indian consumers stand to gain from better-quality and competitively priced vehicles, while auto-component manufacturers and automakers can tap into the EU market with globally competitive products.
Beyond trade, the agreement positions India as a strategic manufacturing and export hub for European carmakers, strengthening the country’s role in global automotive supply chains.
This also shows that the EU is increasingly looking at India as an alternative sourcing hub to China.
2. But why would European OEMs shift their manufacturing to India?
The majority of European OEMs already have assembly or manufacturing plants in India. Last year, Europe imported $6 billion worth of components from India. By using more raw materials locally in India, costs can be reduced. Additionally, importing components into India becomes more attractive, as there will be no tariffs under the FTA.
Now that you know that importing into Europe has far less tariffs, importing components into India and steel—which is a big, big point—is all cheaper. You can start going to far more assemblies in India.
Moreover, with traditional Low-Cost Country (LCC) locations in Europe becoming increasingly expensive, India is well-positioned to emerge as the new LCC, offering competitive manufacturing and export opportunities for European automakers.
3. Which European carmakers could benefit the most?
All European OEMs will benefit, but the impact is likely greater for Volkswagen, Renault, Citroën, Škoda, and similar brands, as they have a larger market share. The middle segment—cars in the Rs 20–25 lakh range—stands to gain more compared to premium brands like Audi, Mercedes, or BMW.
4. Which domestic component makers will benefit?
For the component ecosystem, suppliers who could bring global-standards products will benefit the most.
But the first batch of suppliers to benefit will be those with existing relationships with European OEMs. For example, suppliers already working with Stellantis are likely to gain an early advantage, as their supplier codes, compliance standards, and operational processes are already established.
By leveraging these existing ties, such suppliers are strategically positioned to capture emerging opportunities.
Sona, for example, supplies to 7 of the world’s top 10 PV OEMs. In FY25, Europe contributed 24% to our geographic revenue mix. As we have existing customers in Europe we will get early advantages.
5. Will OEMs in EVs benefit more?
By 2032, BEVs and PHEVs could account for over 80% of car production in Europe. This trend favors EV players, which is why the FTA includes a five-year protection clause for Indian automakers to catch up. If Indian OEMs manage to scale EV production in this period, it will be highly advantageous. Otherwise, they may face challenges.