This lower duty will apply under an annual quota of 250,000 vehicles. At present, India charges a 70 per cent duty on imported passenger cars priced below $40,000, while vehicles costing more than $40,000 attract an effective customs duty of 110 per cent.
The move opens up new opportunities for European carmakers in the Indian market, which is currently the world’s third-largest by sales.
With India’s car market expected to grow to around six million units a year by 2030, several European companies are preparing fresh investments.
Renault is returning to India with a new business strategy, aiming to expand beyond Europe where Chinese carmakers are gaining ground.
Meanwhile, Volkswagen Group is also finalising its next phase of investment in India through its Skoda brand.
Beyond automobiles, the trade agreement will lower or remove tariffs on more than 90 per cent of European goods exported to India.
This includes major reductions in duties on machinery, which currently face tariffs of up to 44 per cent, chemicals with duties of around 22 per cent, and pharmaceuticals taxed at about 11 per cent. Most of these charges will be gradually phased out.
The deal will also bring changes in other sectors. Import duties on European beer will be reduced to 50 per cent, while tariffs on chemicals, aircraft and spacecraft will be eliminated for almost all products.
According to the European Union, the agreement could help double EU exports to India by 2032 and lead to annual duty savings of up to four billion euros on European goods.
In addition to the trade pact, leaders at the India-EU Summit also launched a new EU-India Security and Defence Partnership, signaling deeper cooperation beyond economics.
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