The EU–India trade agreement concluded in January, described by EU Commission President Ursula von der Leyen as a landmark, removes or cuts tariffs on 96.6% of EU exports to India. While agricultural protections remain, key industrial products — notably passenger cars — are now covered, creating fresh access to a market long protected by steep import duties.
Under the deal India has agreed a preferential import quota for 250,000 European-made cars a year, with varying tariff treatments based on price and powertrain; shipments beyond that quota will face higher levies. Until now New Delhi levied roughly 70%–110% on imported cars, a structure that kept many European nameplates almost invisible on Indian roads.
Emerging details show tariffs for cars with import prices above €15,000 will be cut to 40% initially, moving toward 10% over time. Reporting by Bloomberg indicates that levies on up to 160,000 internal-combustion vehicles a year could fall to 10% within five years, and 90,000 electric vehicles a year could reach 10% within ten years. Vehicles outside the quota may see duties decline to roughly 30%–35% over a decade, and Reuters sources say the deepest reductions may apply to models costing more than €35,000.
German industry bodies and manufacturers greeted the pact positively. The VDA, Germany’s auto association, said improved access is urgently needed amid growing protectionism, and BMW called the agreement a historic step that opens new opportunities in an important market. Analysts say the accord is a rare bit of good news for Germany’s car sector, which faces Chinese competition, the electric transition and trade headwinds.
Economists caution the concessions are not a panacea. ING automotive economist Rico Luman notes the deal pries open what was almost a closed export market, but remaining out‑of‑quota tariffs near 40% will still dent competitiveness. Still, an in‑quota 10% rate could let manufacturers offer more models and export additional premium vehicles to India.
India’s auto market remains dominated by domestic names such as Tata and Mahindra and by Japanese and Korean firms including Suzuki and Hyundai; European brands account for roughly 3% of sales. That entrenched competition will make rapid market share gains difficult. Yale lecturer Sushant Singh warns that by the time tariffs fall to their lowest levels, EV adoption will likely be much higher and Chinese firms may already be producing locally — though German EVs could win buyers if made cost‑effectively in India.
New Delhi’s longer-term aim is to attract foreign manufacturers to build local plants rather than rely on imports. Jan Noether of the Indo‑German Chamber of Commerce says local production would deepen German automakers’ presence and let them tap lower costs. Some German groups already have local operations: Volkswagen Group builds Volkswagen, Skoda and Audi models in India, and BMW assembles cars in Chennai to avoid high import duties.
Per capita income in India remains modest — about $3,000 in 2025 — but a growing middle class and a rising luxury segment where BMW, Mercedes and Porsche are known suggest meaningful upside. While India is unlikely to match China’s importance for German automakers soon, the agreement creates a window for premium brands to expand and prepare for longer‑term growth, especially if they pair exports with local production.