The conclusion of the India–European Union free trade agreement is unlikely to immediately bring down prices of most luxury cars, as the structure of the deal protects the domestic auto industry while offering limited concessions to high-end imported models.
While the agreement provides for a sharp reduction in import duties on European cars, the benefits will largely accrue to a narrow set of fully imported luxury vehicles rather than the bulk of models sold by brands such as Mercedes-Benz, BMW, Audi and Jaguar Land Rover, which are largely assembled locally.
Nearly 90% of the 51,000–52,000 luxury vehicles sold annually in India are locally assembled using completely knocked down (CKD) kits, which already attract a relatively low duty of about 16.5%.
Industry executives said the main beneficiaries of the agreement would be niche super-luxury brands that rely entirely on imports, such as Lamborghini, Ferrari, Porsche and Maserati. British marques like Rolls-Royce, Bentley and Aston Martin could also benefit.
India and the EU on Tuesday announced the conclusion of negotiations for the long-pending FTA, which is expected to be signed later this year and could come into force from early 2027. Under the agreement, India will lower import duties on European automobiles in a phased manner, subject to a quota system, while the EU will provide duty-free access to Indian auto exports.
Current Duty Structure
India currently levies import duties of 70% on cars priced below $40,000 and an effective duty of around 110% on vehicles priced above that threshold.
Under the FTA, India has agreed to reduce duties to 10% for a limited number of cars under a quota-based system. However, there will be no out-of-quota concessions, with the intent being to push global manufacturers to invest and manufacture locally rather than rely on imports.
The domestic car market is dominated by vehicles priced below Rs 25 lakh, a segment in which European manufacturers have limited presence or interest. Vehicles priced above Rs 25 lakh fall under a quota-based regime, with volumes to be increased gradually. For every unit of market access given to EU carmakers, India has secured proportionately higher access for its own exports.
Electric Vehicle Exclusion
Crucially, electric vehicles have been kept out of the agreement for the first five years. Duty reductions for EVs will begin only after that, and even then in a staggered manner, starting at 30–35% depending on the segment.
This structure explains why most luxury car prices are unlikely to fall meaningfully in the near term.
Mercedes-Benz India managing director and CEO Santosh Iyer said the FTA would not materially change pricing for the brand. More than 90% of its sales come from locally assembled vehicles, with only a small fraction imported as CBUs. “The agreement is positive for sentiment and long-term growth, but it will not immediately alter prices,” he said. The company’s recent localisation of the Maybach GLS, which led to a price cut of around Rs 42 lakh, underlined that manufacturing decisions, not trade pacts, drive price reductions.
BMW Group India president and CEO Hardeep Singh Brar echoed similar views, saying the FTA would help expand product choice over time and allow companies to introduce niche global models, but would not significantly impact current pricing structures.