Imported cars like Mercedes, BMW to become cheaper in India:Duty on European cars reduced from 110% to 10%; announcement made in the Free Trade Agreement

Cars imported from Europe will now become cheaper in India. The government of India has reduced the import duty on cars imported from Europe from 110% to 10%. This decision is part of the Free Trade Agreement between India and the European Union. The agreement was announced on January 27 2026. at the India-EU Summit. After 18 years of lengthy negotiations, both sides have finalised this agreement. It will be implemented by 2027. Lower duty will apply to 2,50,000 imported vehicles annually: However, the government has set an annual limit of 250,000 vehicles for this. This means that the reduced duty will only apply to a maximum of 250,000 vehicles imported from Europe annually. This is a Tariff Rate Quota (TRQ) system, which is monitored by the Directorate General of Foreign Trade (DGFT) and the Customs Department. There is no clear public way for the customer to know this directly at the moment. Prices of cars assembled here will not decrease: Most of the popular Mercedes-Benz and BMW cars in India are already manufactured through local assembly. This means that parts are imported and assembled here. These attract an import duty of only 15-16.5%, so there will be no major change in their prices due to the FTA with the EU. Now, understand how car prices will decrease: Question: How and when will this be implemented? Answer: The government has not yet provided official information on this. But the duty will not drop from 110% to 10% overnight. First, its official notification will be issued. It will be gradually reduced over the next few years. It is likely to be implemented by the end of 2026 or the beginning of 2027. Question: What types of cars will become cheaper in India? Answer: Only those cars that are completely built in Europe and imported to India will benefit from this deal. These mainly include sports and luxury cars from Mercedes, Audi, Ferrari, and BMW. Question: How much will car prices decrease? Answer: Currently, the estimated price of a Mercedes-Benz G-Wagon car in India is ₹4 crore. The government charges 110% import duty on this, which is about ₹2.1 crore. After the new 10% import duty is implemented, its price is likely to be ₹1.99 crore. Question: Will this exemption also apply to electric vehicles? Answer: Electric vehicles will be kept out of the duty cut for about 5 years to protect domestic players like Tata Motors and Mahindra Mahindra. After that, the cut may apply to them as well. What is the current tax rate? The amount of savings after the duty removal is not yet determined. The situation will become clear only after the government’s notification. India is the world’s third-largest car market: In terms of sales, India is currently the world’s third-largest car market after the US and China. However, EU manufacturers have less than a 4% share in India’s market of 4.4 million units of annual car sales. Despite this, India has kept its auto sector quite protected. High taxes made it difficult for foreign companies to sell their expensive cars in the Indian market. Now, after this deal, it will be easier for companies like Mercedes, BMW, Audi, and Volkswagen to expand their reach in India. Bilateral trade has crossed US$190 billion: In the year 2024-25, total trade has crossed US$190 billion (approximately ₹15.80 lakh crore). During this period, India exported goods worth US$75.9 billion and services worth US$30 billion to European countries. At the same time, Europe sent goods worth US$60.7 billion and services worth US$23 billion to India. This agreement is expected to double the trade. The agreement will reduce tariffs on goods and services, making trade easier. Both sides will also announce a defense agreement and a strategic plan for 2026-2030.