The announcement of renewed momentum around the India–European Union Free Trade Agreement has sparked widespread optimism across sectors, especially among luxury car buyers who have long associated trade deals with lower prices. However, despite the positive sentiment, expectations of immediate relief on luxury car prices in India may be misplaced.
At the heart of the discussion is import duty.
European luxury cars entering India as fully built units currently attract very high customs duties, making them significantly more expensive than in global markets. Under the proposed India–EU FTA, these duties are expected to come down in phases, with initial reductions still leaving tariffs at relatively elevated levels. More importantly, these changes will take time to implement even after the agreement is formally concluded.
The bigger reason prices are unlikely to fall soon lies in the structure of India’s luxury car market itself. A majority of premium vehicles sold by brands such as Mercedes Benz, BMW and Audi are not fully imported. They are assembled locally using completely knocked down kits, which already enjoy lower import duties compared to fully built cars. Since these models dominate sales volumes, any reduction in duties on fully imported vehicles will have limited impact on overall showroom prices.
For consumers, this means that popular luxury sedans and SUVs assembled in India are unlikely to see meaningful price cuts in the near term. Manufacturers also face rising input costs, compliance expenses and investments linked to electrification and emissions norms, all of which limit their ability to pass on tariff benefits even if duties are reduced.
That said, the India–EU FTA could still reshape the luxury car landscape over the long run. Lower duties may encourage brands to bring niche, high performance or limited edition models to India at more competitive prices. Over time, increased competition and improved market access could expand the luxury segment and offer buyers more variety, even if dramatic price drops remain elusive.
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