India–EU FTA Deal: Which European Cars May Become Cheaper in India?

The India–EU Free Trade Agreement (FTA), announced on 27 January 2026, has become a major talking point across the automobile industry and among Indian car buyers. One key reason is simple: European cars are expected to become cheaper in India once the agreement is implemented.

For years, imported cars from Europe have carried extremely high customs duties in India, often making them affordable only for a small luxury segment. The new FTA aims to change that. But which European brands will actually benefit? And will prices really come down in a meaningful way?

Let’s break it down clearly and realistically.

What Is the India–EU FTA?

The India–EU FTA is a comprehensive trade agreement between European Union and India, designed to reduce trade barriers and promote easier movement of goods and services.

Negotiations for this deal have been ongoing for nearly two decades. With the January 2026 announcement, both sides agreed in principle to reduce or eliminate tariffs on a large share of traded goods, including automobiles.

One of the biggest highlights of the deal is India’s commitment to cut import duties on European-made cars, which currently attract some of the highest tariffs in the world.

Why European Cars Are So Expensive in India Today

At present, fully imported cars (CBUs) attract customs duties that can go up to 110% in India. This means a car priced at ₹40 lakh abroad can end up costing nearly double by the time it reaches Indian showrooms.

Because of this:

• Many European brands limit the number of models they bring to India.
• Various high-end cars are still beyond the reach of customers.
• Manufacturers give more attention to local production rather than importing globally popular models.

The India–EU FTA directly targets this issue.

How the FTA Changes Import Duties on Cars

Under the proposed structure of the agreement:

• Import duties on European cars will see a drastic cut.
• At the start, it is expected that tariffs will be reduced from roughly 110% to almost 40%.
• Over the years, by a gradual timeline, duties might be lowered even more; in some instances, they may go down to about 10%.
• Electric vehicles (EVs) may probably be left out of the initial tariff cuts to allow the Indian domestic EV industry to be protected.

Implementation of these changes will take time, but after the changes, European car prices in India will be altered considerably.

Which European Car Brands May Become Cheaper?

1. Mercedes-Benz

Mercedes-Benz brings to the Indian market a handful of its premium and flagship models. If the government reduces import duties, it could result in S, Class, GLS, and AMG variant models becoming more affordable. Hence, Mercedes may be able to target the luxury segment outside metro cities.

2. BMW

BMW also stands to gain a lot from this initiative. BMW already does some local assembly for certain models; however, those that are fully imported, such as the performance M models and a few SUVs, could be significantly cheaper after the tariffs are reduced.

3. Audi

Audi mostly relies on imports for its high-end models. Falling import duties will enable Audi to slash prices of its sedans and SUVs and this will surely bring the brand closer to the Indian luxury car market where it had lost its prominence.

4. Volkswagen

Volkswagen brings its top-of-the-line and some special feature models to India only. If the FTA is there, very popular Volkswagen cars globally that have been priced out of the Indian market could become a reality for Indian consumers.

5. Skoda Auto

As a member of the Volkswagen family, Skoda is probably in favor of a new trade regime as far as tariffs are concerned. To a large extent, Skoda vehicles are made in the local market, imported high performance or luxury models, however, may be offered at attractive prices due to the cut in tariff rates.

6. Renault

Certain models of the premium segment produced by Renault in Europe may especially get better prices if after FTA implementation the company decides to bring a larger number of global models to India.

Will Car Prices Drop Immediately?

This is where expectations need to be realistic.

Even with lower import duties:

• Prices may not drop instantly
• Manufacturers may adjust prices gradually
• Some brands may use savings to improve features or margins instead of cutting prices sharply

However, for fully imported luxury cars, customs duty forms a large portion of the final price. So even partial tariff reductions can lead to meaningful price corrections over time.

What About Electric Cars?

Electric vehicles are a sensitive subject in this agreement.

To safeguard Indian electric vehicle manufacturers, initially, the European electric cars will probably be excluded from the duty cuts. It implies that electric vehicles imported from Europe may stay costly in a short period.

Probably, ICE (petrol/diesel) and hybrid vehicles will gain the most at first, whereas the reduction in EV duties might be thought of at a later stage once domestic manufacturing has become stronger.

Impact on Indian Auto Industry

The news of tariff cuts has created various reactions:

• The stocks of Indian automakers fluctuated on the back of fears of more competition.
• Domestic manufacturers have raised concerns about cheaper imports affecting local production.
• Consumers, however, consider it as an event that has been awaited for a long time and thus the possibility of cheaper prices and more options.

Eventually, this agreement can lead Indian manufacturers to raise the bar in terms of quality, technology, and compete globally.

Should You Wait Before Buying a European Car?

If you are planning to buy a premium European car, waiting could make sense — especially if:

• The model is fully imported
• Your purchase is flexible
• You are not in urgent need

For mass-market cars or EVs, the FTA may not have a significant short-term impact.

Final Thoughts

The India–EU FTA marks a major shift in India’s trade and automobile landscape. While the deal still needs to go through formal approvals and phased implementation, one thing is clear: European cars are likely to become more affordable in India than ever before.

Luxury brands such as Mercedes-Benz, BMW, Audi, Volkswagen, and others stand to gain the most. For Indian consumers, this could mean better pricing, more choices, and access to globally popular models that were once considered too expensive.

As the agreement moves closer to implementation, all eyes will be on official notifications and brand-wise price announcements — because this deal could redefine how Indians buy European cars in the coming years.