The EU–India trade agreement reached in January, hailed by European Commission President Ursula von der Leyen as a landmark pact, cuts or removes tariffs on 96.6% of EU exports to India. While sensitive farm products remain excluded, key industrial goods including cars are covered, offering new access to a market long shielded by high duties.
India has offered a vehicle import quota far larger than past concessions — 250,000 European-made cars annually will enter under preferential terms, with different rates based on price and engine type; imports beyond the quota will face higher levies. New Delhi had imposed duties of roughly 70%–110% on imported cars, keeping many European brands barely present in India.
Details emerging about the car provisions indicate India will reduce tariffs on vehicles with import prices above €15,000 to 40%, with further cuts to 10% phased in over time. Bloomberg reported that levies on 160,000 internal-combustion cars per year would drop to 10% within five years, and 90,000 electric vehicles per year would reach 10% within ten years. Cars outside the quota may see duties fall to 30%–35% over a decade. Reuters sources say the steepest reductions could apply to cars costing more than €35,000.
German industry groups and manufacturers welcomed the deal. The VDA, Germany’s auto trade body, said improved market access is urgently needed amid rising global protectionism. BMW called the agreement a historic milestone that opens additional opportunities in an important market. Analysts view the pact as a rare positive development for Germany’s car sector, which has faced competition from China, the transition to electric vehicles, and trade pressures.
Economists caution the concessions are not a cure-all. ING Bank automotive economist Rico Luman notes the deal opens what was almost a closed export market, but remaining tariffs near 40% for out-of-quota cars will still weigh on competitiveness. Still, the potential 10% in-quota rate could allow manufacturers to expand model offerings and export more premium vehicles to India.
India’s market is dominated by domestic manufacturers such as Tata and Mahindra and by Japanese and Korean brands like Suzuki and Hyundai; European marques account for around 3% of sales or less. Penetrating the market quickly will be difficult given these entrenched competitors. Yale lecturer Sushant Singh warns that by the time tariffs reach promised low levels, electric cars are likely to be much more common and Chinese firms may already be producing in India. He nonetheless says German EVs could find demand if made cost-effectively in India.
A longer-term goal for New Delhi is to draw foreign manufacturers to build local plants rather than rely on imports. Jan Noether of the Indo-German Chamber of Commerce says setting up production in India would strengthen German automakers’ footprint and allow them to tap lower cost structures. Some German groups already operate manufacturing or assembly in India: Volkswagen Group produces Volkswagen, Skoda and Audi models locally, and BMW assembles cars in Chennai to avoid high import duties.
Income per capita in India remains modest — about $3,000 in 2025 — but a growing middle class means rising demand, especially in the luxury segment where BMW, Mercedes and Porsche are established names. Analysts see sizeable growth potential even if India is unlikely soon to match China’s significance for German carmakers. The agreement nevertheless provides a window of opportunity for premium brands to expand and prepare for longer-term growth in a market with multiple headwinds elsewhere. If manufacturers also commit to local production, the gains could be more substantial.