India will allow 1 lakh European ICE cars at preferential duties in the first year
ICE import duties will drop to 10% within five years for vehicles inside the quota
Electric vehicles are protected for five years, with tariff cuts beginning only after fifth year
Under the recently concluded Free Trade Agreement (FTA) between India and the European Union (EU), India will allow the import of 1 lakh internal combustion engine (ICE) cars at preferential duties in the first year of the agreement, MoneyControl reported.
Those 1 lakh cars are divided roughly into three price bands: 34,000 cars priced €15,000–35,000, 33,000 priced €35,000–50,000, and 33,000 priced above €50,000.
1 January 2026
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As per the report, the concessioned quota for ICE vehicles will gradually rise over the life of the agreement, reaching about 1.6 lakh units by the tenth year. Over time, import duties on eligible ICE cars will be cut substantially from current levels (which can be as high as 110% for fully built imports), the plan foresees those in-quota ICE cars seeing duties fall to 10% within five years for the volume covered by the quota.
Tariff Concessions on EV
The FTA reportedly places electric vehicles (EVs) on a slower tariff-reduction timetable. The in-quota tariffs for EVs will begin only in the fifth year of the agreement, with proposed duty rates linked to vehicle prices- 35% for EVs priced between €20,000 and €40,000, 30% for those priced between €40,000 and €60,000, and 30% for vehicles priced above €60,000.
According to the report, the initial quota for EVs in the first eligible year will be capped at around 20,000 units. After five more years, the duty rate is expected to drop to 10%. This quota is expected to expand gradually over time to 90,000 units by the 14th year of the agreement. Concessional duty rates, eventually falling to 10%, will apply only after several years.
Tariff Cut Beyond Cap
Across all vehicle categories, the agreement provides for an annual quota of 250,000 vehicles eligible for tariff concessions.
Imports beyond these in-quota limits will continue to face higher duties.
In practical terms, only cars priced above €15,000 on a CIF (cost, insurance and freight) basis will qualify for these concessions; vehicles below this threshold will not receive any duty relief.
Given the price bands and quota structure, the vast majority of India’s mass-market passenger vehicles, around 90% of sales, typically priced below ₹25 lakh at retail, will remain outside the preferential regime.
