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free trade agreement

Under the proposed Free Trade Agreement (FTA) between India and the European Union (EU), the import duty on cars and electric vehicles (EVs) coming from Europe may be reduced to 1015%. Currently this fee is almost 100%. If this happens, the sales of European luxury electric cars in India may increase rapidly. According to experts, this agreement can be announced in the bilateral summit to be held on January 27. With this deal, India can also become attractive as a manufacturing hub for luxury EVs.

At present, almost 100% duty is levied on European vehicles whose landed cost in India is more than $40,000 i.e. about Rs 37 lakh. This is why the prices of luxury EVs remain very high. The starting price of these vehicles is around Rs 1 crore. If the duty is reduced then companies like BMW, Mercedes, Audi, Volvo will be able to sell their cars in India at more competitive prices.

protection for domestic companies

However, it will not have much impact on the budget EV segment, because this segment is mostly filled with vehicles made in the country. Some security provisions are expected to be kept in the FTA to save Indian companies like Tata Motors and Mahindra. Under the government's EV policy, companies are required to do 25% local value addition by the third year and 50% by the fifth year. That means a major part of manufacturing should be in India only. BMW India CEO Hardeep Singh Brar says that this agreement will be beneficial for both the parties and will increase the exchange of technology and innovation.

Rapid growth in luxury EV segment

The luxury EV segment in India is still small, but around 2,000 units are being sold every year. Between January and November 2025, 10.7% of vehicles in the luxury segment were battery electric, while in the general segment this figure was only 4.5%. There is good demand for vehicles like BMW iX and i4, Mercedes' EQS and EQE, Audi Q8 e-tron, Volvo XC40 Recharge. Even the Porsche Taycan worth around Rs 1.7 crore is attracting people.

India can become a manufacturing base

Mercedes-Benz India CEO Santosh Iyer says that more than 90% of his company's vehicles are made in India, so prices will not be much affected, but overall market growth will benefit. FTA may also bring new rules like digital value addition, battery passport and software-based manufacturing. This can increase software and engineering investment in India and will also help in reducing dependence on China. Overall, this agreement can prove to be a big game-changer for India's auto sector, especially the luxury EV market.