Fast Lane Opens for European Cars as India–EU FTA Slashes Import Duties from 110% to 10%

India and the European Union have concluded a Free Trade Agreement after nearly 20 years of talks, under which import duties on cars will be reduced in phases from 110% to 10%, subject to an annual cap of 250,000 vehicles. According to an official statement, the tariff cuts will be implemented gradually within the agreed quota.

The agreement does not include any tariff concessions for electric vehicles.

India is currently the world’s third-largest automobile market by sales, after the US and China. At present, imported passenger vehicles priced below $40,000 attract a 70% duty, while those above $40,000 face an effective customs duty of 110%.

According to a factsheet shared by the European Commission, India imported €1.6 billion worth of motor vehicles in 2024. Among the top sellers from the region were Volkswagen, BMW, Mercedes-Benz, Audi, Porsche, Maserati, Skoda and Volvo. The deal is expected to expand their presence in India, although they will face competition from domestic and Asian players such as Tata Motors, Mahindra, Suzuki and Hyundai.

The reduced tariff is one of many benefits European and Indian companies will receive under the long-awaited FTA. A draft of the agreement is expected to be published today. The deal removes or reduces tariffs on 96.6% of EU goods exports to India. Overall, the tariff cuts are expected to save around €4 billion per year in duties on European products. According to an EU statement, the agreement is expected to double EU goods exports to India by 2032.

However, companies will have to wait for both sides to ratify the deal.

The EU and India first launched negotiations for a free trade agreement in 2007. Talks were suspended in 2013 and relaunched in 2022. The 14th and final formal negotiating round took place in October 2025, followed by intersessional discussions at technical and political levels.

Alongside the relaunch of FTA negotiations, the EU and India also began talks on a Geographical Indications Agreement and an Investment Protection Agreement. Negotiations on these agreements are still ongoing.

The agreement removes or reduces often prohibitive tariffs—averaging over 36%—on EU agri-food exports, opening a large market to European farmers. For example, Indian tariffs on wines will be cut from 150% to 75% upon entry into force and eventually to as low as 20%. Tariffs on olive oil will be reduced from 45% to zero over five years, while tariffs of up to 50% on processed agricultural products such as bread and confectionery will be eliminated.

It also reduces tariffs of up to 44% on machinery and electrical equipment to zero for almost all products under the new tariff regime. Tariffs on aircraft and spacecraft exports from the EU will be eliminated for nearly all products. Tariffs of up to 27.5% on optical, medical and surgical equipment will be removed for around 90% of products.