Your dream of owning luxury cars may come true:BMW, Ferrari, Jaguar, Mercedes-Benz prices go down as the India-EU trade agreement reaches

Trade talks between India and the European Union (EU) conclude today. Both sides announced a free trade agreement (FTA).
The tariffs on auto/cars have been reduced significantly to 10% from earlier 70-110 %. The move is likely to reduce the cost of European luxury brands like Audi, BMW, Jaguar, etc. The significant drop in duties on cars will open the gates of one of the most protected auto markets in the world to European car makers. Intially, the quota has been fixed at 2,50,000 cars per year as per the press statement of the two trading partners.
This explainer looks at whether European car prices will actually fall in the Indian market after the trade deal. Will cars be cheaper in the Indian market? India plans to slash import duties on European cars such as Volkswagen, BMW, Mercedes-Benz, etc, two sources familiar with the matter told Reuters. Prime Minister Modi has reduced tariffs on autos from 110 per cent to 10%. European cars will be cheaper in the Indian market after the FTA is implemented, which will take at least a few months. “Cars priced at around €15,000 (Over 16 lakh in Indian rupees) or more are expected to benefit the most from the tariff cuts. As a result, Indian consumers will pay lower prices for European cars, while Indian-made cars will remain unaffected by the tariff changes,” the professor explains. He further states that Indian carmakers operate in overlapping price segments, and as imported cars become more competitively priced, competition will increase.
This is positive for the industry, as greater competition leads to better products, improved services, and overall benefits for the economy. Currently, what tariffs does India impose on European cars?
European auto companies face tariffs ranging from 70% to 110% on exports to the Indian market. India is the world’s third-largest auto market. Which Indian carmakers dominate the market right now?
Currently, Tata Motors, Mahindra, and Japanese auto giant Maruti Suzuki dominate the Indian auto market. How will lower tariffs impact Indian car manufacturers?
India has long protected its auto industry, with European automakers such as BMW, Renault, and Volkswagen paying tariffs between 70 % and 110 %. Lower tariffs will affect Indian manufacturers, but there is a caveat. Sakti Prasad Srichandan, Assistant Professor at JNU and an expert on India–EU trade relations, explains: “The proposed FTA will impact India’s automobile industry, but in the first phase, only 2.5 lakh cars will be allowed at 10 % tariffs. More cars may be added later.” He adds that electric vehicles are likely to remain unaffected, as the sector is still in its infancy. Competition will increase between Indian automakers—Tata, Mahindra, Maruti Suzuki—and European companies like BMW, Renault, and Volkswagen. Will tariffs also apply to agricultural products?
Professor Srichandan notes that agriculture remains the most sensitive area in the India–EU FTA talks. A recent example is the EU–Mercosur agreement, delayed after the European Parliament referred it to the European Court to verify the legal process. This highlights how contentious agricultural provisions can be. Many details of the India–EU negotiations on agriculture remain undisclosed, and clarity will emerge only when the full text of the agreement is published. Both sides are likely to proceed cautiously. As democracies, India and EU countries face strong domestic pressures, particularly regarding farm subsidies. India provides support to farmers to boost production, which the EU sees as creating an uneven playing field, even though European countries also subsidise their own farmers. Why is the India-EU deal called ‘Mother of All Deals’? The India–EU trade deal is being called the “mother of all deals” for three major reasons. The EU is a group of 27 countries and the world’s largest trading bloc, while India is one of the world’s biggest economies. Together, they create a market of nearly 2 billion people and cover around 25% of global GDP. Amid current global uncertainty, the world is looking for alternatives to the US and China. An India–EU deal could reshape global supply chains. India is expected to rapidly emerge as a production hub in place of China, trade with the EU will expand, and the impact of Trump-era tariffs will be neutralised. India and the EU recorded trade worth ₹12.5 lakh crore last year. With an FTA, India will gain deeper access to European markets such as Berlin, Rome, and Munich, while Europe will strengthen its presence in Indian markets like Delhi, Mumbai, and Kolkata. Estimates suggest that India–EU trade could soon double after the FTA. By connecting one of the world’s largest consumer markets with its biggest trading bloc, the pact could alter global trade patterns and set new standards in areas such as digital trade, investment protection, and green growth. As Commerce Secretary Rajesh Agrawal has noted, negotiations are “very close” to the finish line. Even if the agreement is not formally unveiled at the January summit, its emerging shape explains why it is being described as the “mother of all deals”, with economic and strategic implications that go far beyond India and Europe. Why is the EU a crucial trading partner for India? India–EU goods trade crossed US$136 billion (around ₹11.3 lakh crore) in FY25, driven by a complementary value chain rather than direct competition, according to GITRI. India primarily exports labour-intensive and downstream products, while the EU supplies capital goods, advanced technology, and industrial inputs, making tariff reductions mutually beneficial for both sides. Indian exports to the EU largely replace imports from third countries rather than compete with European manufacturing, much of which has been offshored over the years. EU exports of machinery, aircraft, electronics, chemicals, and metal scrap directly support India’s factories, MSMEs, and recycling ecosystem. High-end machinery led India’s imports from the EU at US$13.0 billion (about ₹1.08 lakh crore), including turbojets, control valves, and specialised industrial equipment not produced at scale in India. Electronics imports worth US$9.4 billion (around ₹78,000 crore)—mainly phone components and integrated circuits—are critical for India’s smartphone assembly and electronics exports. Imports of aircraft worth US$6.3 billion (₹52,000 crore), medical devices worth US$3.8 billion (₹31,500 crore), and specialised medicines worth US$1.4 billion (₹11,600 crore) highlight India’s reliance on EU high-technology products. Industrial inputs such as rough diamonds, chemicals, plastics, steel, and auto components underpin India’s manufacturing base and export competitiveness. India’s exports to the EU are led by refined petroleum products worth US$15.0 billion (₹1.25 lakh crore) and electronics worth US$11.3 billion (₹94,000 crore), followed by garments, chemicals, steel, pharmaceuticals, and auto parts.

He adds, “While the EU is a regulatory superpower with a strict approach to trade, a successful FTA would be beneficial for both sides. The EU strongly believes in a rules-based system, whether in global governance or trade, and a stable and transparent tariff regime would reinforce this partnership.” Will the India–EU trade deal serve as a hedge against higher US tariffs? The India–EU trade deal is expected to act as a hedge against US tariffs of up to 50 %. In August 2025, the US imposed an additional 25 % tariff on Indian goods, citing India’s purchases of Russian oil. Professor Sakti Prasad Srichandan agrees that the FTA will protect such US tariffs. “Yes, that is why it is called the mother of all FTAs,” he says. “It brings together a massive population and a large market, allowing both Indian and European products to benefit,” he adds. “At a time when the US and its former president, Donald Trump, are threatening other countries with trade actions, this agreement also serves as a counterbalance to such pressures,” the professor notes. Graphics: Anas and Gaurav