India and the European Union have finalized a long-awaited Free Trade Agreement, reducing tariffs on European cars entering India from 110% to 10%. This lower duty will be applicable under an annual quota of 250,000 vehicles. The agreement presents new opportunities for European car manufacturers in India, the world’s third-largest car market by sales.
The Indian car market is projected to expand to approximately six million units annually by 2030, prompting various European companies to plan fresh investments. Renault is set to re-enter the Indian market with an updated business strategy to expand beyond Europe, where Chinese automakers are making inroads. Additionally, Volkswagen Group is in the final stages of outlining its next investment phase in India through its Skoda brand.
Apart from the automotive sector, the trade deal will reduce or eliminate tariffs on over 90% of European goods exported to India. This includes significant cuts in duties on machinery, currently facing tariffs of up to 44%, chemicals at around 22%, and pharmaceuticals taxed at about 11%, with most of these charges being phased out gradually.
The agreement will also bring about changes in various other sectors. Import duties on European beer will be halved to 50%, while tariffs on chemicals, aircraft, and spacecraft will be removed for nearly all products. The European Union estimates that this deal could potentially double EU exports to India by 2032 and result in annual duty savings of up to four billion euros on European goods.
In addition to the trade pact, the India-EU Summit also introduced a new EU-India Security and Defence Partnership, indicating a broader cooperation beyond economic ties.
