Full Breakdown
India-EU Free Trade Deal Opens Up Car Market with Tiered Tariff Quotas
By Drooid · · How we work
Core Automotive Provisions of the Agreement
The draft India-EU Free Trade Agreement creates a tariff-rate quota (TRQ) for up to 100,000 completely built-up (CBU) internal-combustion-engine (ICE) and non-plug-in hybrid cars in the first year, rising to 160,000 vehicles by year 10 and staying at that level thereafter.
The concessional duty within the quota is linked to the vehicle’s CIF price:
| Price band (Euro) | In-quota duty – Year 1 | In-quota duty – Year 5 | First-year allocation |
|---|---|---|---|
| 15,000 – 35,000 | 35 % (down from 110 %) | 10 % (down from 110 %) | 34,000 units |
| 35,000 – 50,000 | 30 % (down from 66 %) | 10 % (down from 66 %) | 33,000 units |
| > 50,000 | 30 % (down from 66 %) | 10 % (down from 66 %) | 33,000 units |
| < 15,000 | No concession | – | – |
A separate TRQ for completely knocked-down (CKD) ICE and hybrid vehicles is set at 75,000 units per year for the first five years, falling to 50,000 units from year 10.
Battery-electric vehicles (BEVs) and plug-in hybrids receive no concession initially. Their CBU quota starts at 20,000 units in year 5, expands to 50,000 by year 10, and reaches 90,000 by year 14, with an in-quota duty of 30 % in year 5 falling to 10 % from year 10.
Background & Context
Negotiations concluded in January 2026. The pact is expected to be signed by year-end and to enter into force in 2027. Besides automotive provisions, the agreement includes reciprocal concessions for EU wine, pork, apples, kiwifruit, pears and peaches, each governed by price-based quotas.
Data & Statistics
- First-year CBU quota: 100,000 units (? six times the 2025 EU-India import volume of 17,191 cars).
- Quota growth: 107,500 units in Year 2; 115,000 in Year 3; 122,500 in Year 4; 130,000 in Year 5; 160,000 from Year 10 onward.
- CKD quota: 75,000 units annually (Years 1-5); 50,000 units from Year 10.
- Out-of-quota duties: For cars priced €15,000-€50,000, duty will fall to 35 % by Year 10; for cars above €50,000, duty will fall to 30 % by Year 10.
Why It Matters
Reduced duties make it financially viable for European manufacturers such as Volkswagen, Mercedes-Benz and BMW to increase CBU shipments to India, especially for niche, performance and high-end models that were previously uneconomical under higher tariffs. The price-banded structure protects low-cost segments while opening higher-priced segments to competition. Later-stage BEV and plug-in hybrid concessions align with India’s decarbonisation goals, albeit on a delayed timetable.
Conflicting Reports & Gaps
- Premium-car allocation: Autocar India cites a fixed 33,000-unit block for cars above €50,000 in Year 1, while Moneycontrol and IndiaTimes mention a 43,000-unit reservation from Year 5 onward.
- CKD quota trajectory: Sources agree on 75,000 units for the first five years but differ on the exact decline after Year 5.
- Duty percentages for the €15,000-€35,000 band: Autocar India lists a 35 % duty in Year 1, whereas Moneycontrol reports a drop from 110 % to 35 %; both agree on a 10 % duty by Year 5.
- Out-of-quota duty pathways: All agree on eventual reductions to 30-35 % by Year 10, but differ on whether the reduction is linear or stepwise.
These inconsistencies reflect the draft nature of the text and the possibility of further negotiations before final ratification.