EU FTA: India Ring-Fences Auto Market With Calibrated Entry For European Carmakers

India's auto sector is set for a calibrated opening under the India–EU Free Trade Agreement, with the government putting in place tight guardrails on price, volumes and timelines to protect domestic manufacturers while offering European carmakers a limited entry route.

Under the agreement, India will cut import duties on 1,00,000 internal combustion engine (ICE) cars in the first year, slashing tariffs sharply from 110% to 40%. This concession, however, applies only to higher-end vehicles, with no duty cuts for cars priced below €15,000 CIF, a threshold that translates to roughly Rs 27–28 lakh post taxes in India.

Over a decade, the annual quota for fuel-powered cars eligible for lower duties will rise to 1,60,000 units, with tariffs gradually easing to 10% by year 10. The concessions are split across three price bands — €15,000–35,000, €35,000–50,000 and above €50,000 — ensuring the mass-market segment remains shielded. Overall, annual tariff concessions are capped at 2.5 lakh vehicles, including completely knocked down (CKD) units, whose quota tapers from 75,000 initially to 50,000 by year 10.

Electric vehicles have been given even longer protection. No duty cuts apply to EVs below €20,000, and concessions only begin five years into the FTA. In year five, a quota of 20,000 EVs will be eligible for reduced duties, rising gradually to 90,000 units annually by year 10, again segmented across higher price bands.

Officials say the structure reflects a deliberate policy choice. India has ring-fenced its sub-Rs 30 lakh car market, preserved space for domestic EV players to scale up, and retained the right to allocate quotas selectively to established EU manufacturers. The expectation is that European automakers will first test demand through limited imports and eventually localise manufacturing of select models in India.

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