- India and the EU are finalizing a Free Trade Agreement framework before Budget 2026
- India may cut car import tariffs for EU automakers from 110% to 40%
- Tariff cuts will apply to 200,000 combustion-engine cars annually, mostly benefiting premium brands
Shares of auto companies will be in focus heading into trade on Monday as India and the European Union look to finalise the Free Trade Agreement framework before the Union Budget 2026. A key part of the talks between the EU and India revolves around the Indian government potentially cutting car import tariffs for EU carmakers.
Over the weekend, Reuters reported that India is planning a major cut in import tariffs, marking the biggest ever easing in the country's tightly-protected automobile market. The import tariffs for EU carmakers could be slashed from 110% to 40%, thus offering greater market access for European companies to one of the fastest-growing automobile markets in the world.
Given that the EU is already home to some of the biggest car brands in the world, including the likes of Ferrari, BMW, Mercedes, Audi, Volkswagen and Lamborghini, among others, the move could have serious implications for India's premium automobile market.
The Reuters report adds that the initial tariff cut will apply to a limited quota of around 200,000 combustion-engine cars annually, with a minimum import price of over 15,000 euros. This structure is designed to primarily benefit premium European brands such as Volkswagen, Mercedes-Benz and BMW, which have long sought easier entry into the Indian market.
It must be noted that battery electric vehicles (EVs) could be excluded from the import tariff cuts for the first five years of the agreement, thus protecting the nascent and developing market for the EV space, led by the likes of Mahindra & Mahindra and Tata Motors.
As for the luxury market, shares of major Indian automakers such as Tata Motors, Mahindra & Mahindra, Hyundai Motor and Maruti Suzuki will be in focus, as they brace themselves for higher competition from foreign players, particularly for the luxury models.
A recent note from Morgan Stanley suggests the move could have a limited impact on Indian automakers, but the competitive intensity could rise over time.
ALSO READ: India Plans Major Cut In Car Import Tariffs In Trade Deal With EU: Reports
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