India-Europe Trade Deal: Buying a BMW, Volkswagen or Mercedes? Here's How Much Price Cut Is Expected Post Deal

India and the European Union on Tuesday, January 27, concluded a landmark Free Trade Agreement (FTA), touted as the "mother of all deals," aimed at significantly reducing tariffs on a range of key imported products. The imported car segment is likely to emerge as the biggest beneficiary and is expected to see notable price cuts following the proposed tariff reductions under the pact.

Automakers like Volkswagen, Renault, Mercedes-Benz, BMW, etc are likely to benefit from the India-EU FTA deal. As per the FTA deal, the Indian government is expected to slash tariffs on imported cars from a peak rate of 110% to as low as 10%. The development is likely to benefit people who are interested in imported premium cars.

India-EU FTA Deal

Prime Minister Narendra Modi, European Commission President Ursula von der Leyen and European Council President Antonio Costa, on Tuesday jointly announced the conclusion of the India European Union Free Trade Agreement at the 16th India-EU Summit.

The India-EU trade pact covers conventional areas such as trade in goods, services, trade remedies, rules of origin, customs and trade facilitation, as well as emerging areas such as SMEs and digital trade, amongst others.

Under the India-EU trade deal, the government is likely to slash tariffs on imported cars from 110% to 10 %. The move is likely to provide EU carmakers greater access to Indian passenger vehicle market, which stands as the third largest global market in terms of volume.

India-EU Trade Deal: Win Win Situation For EU Carmakers

Major EU OEMs like Volkswagen (VW), Renault (RNO), Stellants (STLA), BMW and Mercedes (MGG) saw a decline in their sales in the calendar year 2025. The FTA closure has come around a time of a long-awaited India-US trade deal and rising geopolitical tensions globally. "These OEMs are already manufacturing locally, but the tariff reduction can help them scale up and launch more models at competitive prices," noted PL Capital in its latest report.

Price Cut Expected On Volkswagen, Renault, Mercedes-Benz, BMW, etc

"Post implementation, base variants of EU-made 5- seater sedans/luxury SUVs like Audi A4, Audi Q3, and BMW 3-series, could be priced at Rs30,00,000-40,00,000 (ex-showroom), which are still much more expensive than the premium trims of Indian 7-seater XUV 7XO or 5-seater Tata Harrier priced at ~Rs25,00,000," stated PL Capital in its report.

While the India-EU trade deal has fuelled expectations of sharply lower car prices, especially those manufactured by EU firms, experts warn that the reality could be more calibrated than celebratory.

"While the agreement provides for a phased reduction in import duties on European cars, tariffs are only one variable in a far more complex pricing equation. Today, customs duty typically accounts for roughly 35-40% of the final on-road price of a fully imported luxury car in India. The rest is absorbed by GST, compensation cess, dealer margins, logistics, homologation costs, foreign exchange movement, and-critically-brand-led pricing strategy," explains Tushar Badjate, Director of Badjate Stock & shares Pvt Ltd.

"In other words, even a meaningful cut in headline tariffs does not translate into a proportional fall in showroom prices," Tushar Badjate added.

The material price reduction is unlikely to come effect in the coming months and may be implemented from next year, noted PL Capital.

"Any consumer benefit will be selective-visible in limited-volume imports or niche luxury models-rather than broad-based or immediate," stated Badjate while mentioning that the lower landed costs are likely to improve the economics of premium European vehicles.