India-EU FTA to allow import of 1 lakh cars at lower tariffs in first year

The India-EU Free Trade Agreement (FTA), once signed and implemented, will allow European carmakers to import 1 lakh completely built-up (CBU) internal-combustion engine (ICE) and non-plug-in hybrid cars into India at concessional import duties in the first year, according to the tariff schedule under the deal. The quota will gradually rise to 1.6 lakh vehicles from the 10th year.

The negotiations concluded in January 2026. The agreement is yet to be signed and will require completion of the respective internal procedures before it can enter into force. It is expected to be signed by the end of this year and could come into effect from 2027.

1. First-year quota covers 1 lakh CBU cars
2. Import duty within quota starts at 30 percent
3. Quota rises to 1.6 lakh cars from 10th year

Lower duties for imported cars

In the first year, ICE and non-plug-in hybrid cars priced between 15,000 euros and 35,000 euros will attract a 35 percent import duty within the quota. Cars priced between 35,000 euros and 50,000 euros, as well as those above 50,000 euros, will attract a 30 percent duty. Cars priced below 15,000 euros will not receive a tariff concession in the first year.

The 1 lakh-unit quota will be divided across three price bands, with 34,000 units allocated to cars priced between 15,000 euros and 35,000 euros, and 33,000 units each for the 35,000-50,000 euro and above-50,000 euro categories.

The quota will increase to 1.075 lakh vehicles in the second year, 1.3 lakh in the fifth year and 1.6 lakh from the 10th year. The preferential duty across all three price bands will be 10 percent from the 10th year.

EVs and plug-in hybrids get separate quota

Pure electric and plug-in hybrid cars will not receive concessional access under this initial quota. Their preferential access will begin from the fifth year for vehicles priced above 20,000 euros.

A separate quota for battery-electric and plug-in hybrid CBUs will start at 20,000 vehicles in the fifth year and increase to 90,000 vehicles by the 14th year. The preferential duty will be 30 percent in the fifth year and will fall to 10 percent from the 10th year.

Cars imported outside the quota will continue to attract higher duties, ranging from 66-110 percent initially. These rates are scheduled to fall to 30-35 percent by the 10th year.

European carmakers could expand CBU imports

The lower duties could make it more viable for European manufacturers such as Volkswagen, Mercedes-Benz and BMW to bring more CBUs from Europe. The deal could particularly help them introduce a wider range of niche, performance and high-end models that are currently less viable to import at higher duties.

The FTA also provides reciprocal concessions for cars exported from India to the EU.