The proposed free trade agreement (FTA) between India and the European Union is expected to reduce import duties on automobiles, including electric vehicles (EVs), from the 27-nation bloc to 10-15 percent. The move could lead to a surge in European sales of luxury electric vehicles in India, according to a report.
The deal, expected to be announced at the bilateral summit on January 27, is also expected to position India as an attractive manufacturing hub for luxury electric vehicles, according to a report by The Economic Times. Currently, India imposes an import duty of around 100 per cent on European automobiles with a landed cost of more than $40,000 (around Rs 37 lakh). This levy applies to luxury electric vehicles, which generally start at Rs 1 crore.
With the FTA likely to reduce import duties, European manufacturers of luxury electric vehicles could price their products more competitively in the Indian market. However, Santosh Iyer, Managing Director and CEO, Mercedes-Benz India, emphasized that the company’s sales in India are locally manufactured. He added that reductions in import duties could lead to significant price reductions and that India remains a hub for Mercedes-Benz exports to the EU and global markets.
The FTA is expected to include provisions that balance market access with protection for domestic manufacturers such as Tata Motors and Mahindra & Mahindra. Progressive localization requirements and value-addition standards for EV manufacturers will likely continue, ensuring that increased imports do not impact India’s long-term manufacturing goals.
High-end European manufacturers are also expected to benefit from new regulations on digital value addition, battery passports and software-driven manufacturing. The FTA is likely to set standards for battery passports, which are digital records of a battery’s life cycle, aligning with European climate targets and supporting sustainable mobility.
Battery electric vehicles represented 10.7% of the powertrain mix in the luxury segment between January and November 2025, compared to 4.5% for mainstream manufacturers, according to data from Jato Dynamics.
