India's Latest Trade Deal Set to Make Luxury European Cars Cheaper

India's Latest Trade Deal: India and the European Union have reached a major trade agreement, which could lower the cost of importing select European cars into the country, giving potential relief to premium vehicle buyers. As part of the Free Trade Agreement (FTA), the basic customs duties on fully built cars shipped from Europe will be reduced in a phased manner over several years. However, since multiple luxury automakers rely on CKD (completely knocked down) units for local assembly, the FTA benefit will not apply to these models.  

Currently, the European cars that come via the CBU route attract a 70 per cent of Basic Customs Duty (BCD), there is a 40 per cent of Agriculture Infrastructure Development Cess (AIDC), an additional 28 per cent of IGST and compensation cess, which results in effective rates over 140-170 per cent on CIF value.

However, after the FTA, there is a flat 40 per cent duty and adding only an approximate of 28 per cent GST/cess afterwards for a total effective tax of approximately 70 to 90 per cent. The move is expected to benefit high-end European auto manufacturers whose vehicles are directly imported into the country, making some models more competitively priced.

However, the impact of the FTA will not be universal as the reduction in duties will apply only to 2.5 lakh cars imported annually. Once the quota is exhausted, higher tariffs will continue to apply.

Here is a list of the luxury cars that are expected to benefit under the India-EU FTA:

• BMW M2
• BMW M4 Coupe
• BMW M8 Coupe
• BMW Z4
• BMW i4
• BMW i7
• BMW XM
• Audi RS Q8
• Audi Q8
• Mercedes-Benz G-Class
• Mercedes-Benz AMG GT
• Mercedes-Benz S-Class Maybach
• Mercedes-Benz EQS SUV Maybach
• Porsche 911
• Porsche 718
• Porsche Taycan
• Porsche Cayenne Turbo GT
• Porsche Macan GTS
• Porsche Panamera
• Land Rover Defender 130
• Land Rover Range Rover
• Rolls-Royce Phantom
• Rolls-Royce Ghost
• Rolls-Royce Cullinan
• Rolls-Royce Spectre
• Bentley Continental GT
• Bentley Bentayga
• Bentley Flying Spur
• Aston Martin Vantage
• Aston Martin DB12
• Aston Martin DBX
• Lamborghini Urus SE
• Lamborghini Temerario
• Lamborghini Revuelto
• Ferrari Roma
• Ferrari SF90
• Ferrari Purosangue

Santosh Iyer, MD & CEO Mercedes-Benz India, said, “Mercedes-Benz welcomes the India-EU FTA as it will have a positive cascading effect on customer sentiments for the luxury segment, with a boost in overall economic growth. A gradual tariff reduction on vehicles and fully liberalised automotive parts are strategically important decisions in the FTA for the automotive industry. The FTA opens up new avenues for customers with improved vehicle allocations, better availability of top-end global models for Indian market, faster access to the latest technology and creating a stronger luxury car ecosystem. Mercedes-Benz will, however, continue to value add to customers with local production of world-class models from our manufacturing plant. ”

Addressing the update on India-EU FTA, Shailesh Hazela, CEO and Managing Director, Stellantis India, said, “The conclusion of the EU–India Free Trade Agreement is a landmark moment that deepens economic cooperation and strengthens India’s position in the global value chain. At Stellantis India, we see this agreement as a significant accelerator for our long-term commitment to ‘Make in India for the World.’ Reduced trade barriers will help enhance manufacturing competitiveness, expand export potential, and support the seamless integration of our India operations into global supply chains. For our customers in India, this development enables greater access to advanced technologies and the latest offerings from the Stellantis line-up.”

The FTA's effect on the prices of the car will depend on quotas, timelines and manufacturers’ import strategies rather than an across-the-board price cut.

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