India-EU FTA Likely to Cut Auto Import Duties, May Spur Surge in Luxury EV Imports
The forthcoming Free Trade Agreement (FTA) between India and the European Union is poised to significantly reduce import duties on automobiles, including electric vehicles (EVs), potentially igniting a surge in European luxury EV sales in India.
Key Impacts of the India-EU FTA on Luxury EV Imports
– The FTA is expected to lower import duties on European automobiles from the current rate of approximately 100% to around 10-15%. This reduction will especially benefit luxury EVs, a quickly evolving segment in India.
– Currently, India imposes a hefty import duty on luxury vehicles exceeding a landed cost of $40,000 (about ₹37 lakh). With the significant duty cuts, European manufacturers can offer more competitively priced models in the Indian market.
Sustaining Domestic Markets Amidst Increasing Imports
– Budget EVs, primarily produced by domestic brands like Tata Motors and Mahindra & Mahindra, are likely to remain largely insulated from these changes due to their local production ethos.
– The FTA aims to strike a balance, allowing for increased market access while still protecting local manufacturers.
– Regulatory requirements like phased localization and value addition norms for EV makers are expected to continue, securing India’s manufacturing ambitions. The government’s EV policy mandates a 25% domestic value addition by the third year of operation and 50% by the fifth year.
A Boost for India as a Manufacturing Hub
– Beyond lowering tariffs, the India-EU FTA is also likely to position India as a more attractive manufacturing base for luxury EVs.
– Industry leaders, including Hardeep Singh Brar, President and CEO of BMW Group India, praise the agreement as a vehicle for both nations to enhance trade, technology exchange, and innovation.
– Current statistics indicate that India’s luxury EV segment sells approximately 2,000 units annually and is outpacing the mass market in electrification efforts. In 2025, battery electric vehicles accounted for 10.7% of the luxury segment’s powertrains, compared to just 4.5% in mass-market vehicles.
Trends in the Luxury EV Market
– Prominent luxury models gaining traction in India include BMW’s iX and i4, Mercedes-Benz’s EQS and EQE, Audi’s Q8 e-tron, and Volvo’s XC40 Recharge—offering a blend of performance, sustainability, and advanced technology.
– The Porsche Taycan, with its price point around ₹1.7 crore, continues to garner interest, highlighting the growing acceptance of electric drivetrains among affluent consumers.
Future Prospects and Innovations
– The FTA is projected to introduce new regulations around digital value addition, battery passports, and software-driven manufacturing. This paves the way for premium European automakers to invest more in India’s software and engineering sectors.
– Notably, the concept of a “battery passport”—a digital record of the battery’s lifecycle—will help reduce reliance on China and align with Europe’s goal of becoming the first climate-neutral continent by 2050.
The India-EU FTA is not just a transformative agreement for the automotive sector; it has the potential to reshape the luxury EV landscape in India. By facilitating reduced import costs and ensuring robust local manufacturing practices, this deal promises to benefit both Indian consumers and European manufacturers. Overall, we can anticipate a future where luxury EV options are more accessible and competitive, paving the way for exciting developments in the Indian automotive market.