Indian automakers are set to secure significant market access across Europe, with the European Union agreeing to admit up to 2.5 lakh Indian-made passenger cars annually at a concessional tariff of 8% under the proposed bilateral free trade agreement.
According to the draft text released by the EU, this annual quota will expand incrementally to 4 lakh units by the 10th year of implementation. Any shipments exceeding the quota cap will attract standard Most Favoured Nation (MFN) duties.
The initial tariff-rate quota (TRQ) covers Indian-origin internal combustion engine (ICE) passenger cars and hybrid electric vehicles (HEVs) priced up to €50,000 on a Cost, Insurance, and Freight (CIF) basis. Under the negotiated schedule, the initial 8% duty will decline on a yearly trajectory-dropping to 6% in Year 2, 4% in Year 3, 2% in Year 4, and reaching zero tariffs by Year 5.
For conventional and hybrid passenger vehicles valued above €50,000 CIF, no quota limits will apply. Instead, import duties will be phased out gradually across the board, tapering down from 8% in the first year to zero by Year 10.
Electric and alternative-fuel vehicles have been placed under separate TRQ frameworks with tariff relief kicking in from Year 5:
- Sub-€40,000 Category: Covers battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). An initial quota of 27,500 units at an 8% duty will take effect in Year 5, expanding to 60,500 by Year 9-at which point the duty will be fully eliminated-before topping out at 1,25,000 units from Year 14 onward.
- Mid-Tier (€40,000 to €60,000): A quota starting at 16,250 units in Year 5 at 8% duty will expand to 75,000 units by Year 14, alongside duty-free entry.
- Premium (Above €60,000): Starting with 6,250 units in Year 5 at 8% duty, the quota will rise to 13,250 in Year 9-when the duty drops to zero-and expand to 25,000 units from Year 14 onward.
Beyond the automotive sector, Brussels has also extended quota-based duty concessions to key Indian agricultural and processed food exports, including table grapes, dried onions, cucumbers, gherkins, molasses-based rum, and ghee. Under the terms, Indian ghee exporters will receive a 50% tariff cut on base customs duties for up to 1,000 metric tonnes annually from the date the agreement enters into force.
The conclusion of negotiations for the India-EU free trade agreement was announced on January 27. The formal pact is expected to be signed later this year and come into force from next year.
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