Automotive News Europe — 2026-01-27
Automotive Industry
The European Union-India free-trade agreement, which will sharply lower tariffs on imported cars, could help open up the world’s third-largest auto market to European automakers, who have invested billions in India with little to show for it thus far.
Under the agreement, signed Jan. 27, tariffs on up to 90 percent of EU goods imported to India will be eliminated or reduced, potentially saving EU companies €4 billion annually.
“It will strengthen economic and political ties between the world’s second and fourth largest economies, at a time of rising geopolitical tensions and global economic challenges,” the EU said. “We have created a free trade zone of 2 billion people, with both sides set to gain economically,” European Commission President Ursula von der Leyen said in a release.
For cars, duties will fall to 35 percent from 110 percent immediately, and 10 percent over five years, with an annual quota of 250,000 vehicles. It’s likely to benefit German premium brands including BMW, Audi and Mercedes-Benz, who import and build cars in India, but largely from kits that face high tariffs.
Others expected to profit include Renault Group, Volkswagen Group and Stellantis, all of which build and sell lower-priced models in India with local supply chains; the new trade rules will help them build out their lineup with more-expensive cars imported from Europe.
In 2025, auto imports from the EU to India were valued at €1.6 billion.
Apart from cars, tariffs on imported components from Europe will be abolished after five to 10 years, making it easier for companies to streamline supply chains as well.
Why is India important for European automakers?
Europe’s domestic market has contracted by up to 3 million sales a year since the pandemic, and in China, the world’s largest market, domestic brands are taking market share from VW, Mercedes, Porsche and BMW – and Renault Group and Stellantis have largely exited. With 1.5 billion people and a growing middle class, India has long tantalized foreign automakers, but tariffs and local-content rules have protected established giants such as Maruti Suzuki — which has a market share of more than 40 percent — Mahindra & Mahindra, Hyundai and Tata.
Despite some up and down years, the India passenger-car market has tripled in size since 2007, when about 1.5 million cars were delivered to dealers, according to Autopunditz, which analyzes India sales data. In 2025, the market reached 4.5 million, third behind China and the U.S., and ahead of Japan and Germany.
What are Europe’s automakers saying about the trade pact?
Renault brand CEO Fabrice Cambolive said Jan. 27 that it reinforces Renault Group’s decision to investment in India.
“Strategically, it shows the direction and this capacity to work closer between Europe and India is for us, a good news, because we are a company which has bet on these two continents on a very high level,” Cambolive told Reuters in the southern Indian city of Chennai at the launch of the new Duster SUV.
Cambolive said while it is important to be able to export from Europe to India, it is also important to see what role India can play in the development of the European automotive industry in terms of parts and cars.
“India was perhaps not the top one priority (for Renault) in the last four years, but will become so because of this getting closer strategy, the strength of our people there, the potential of market growth, and of course, the FTA,” he added, referring to the free-trade agreement.
ACEA, the European automakers’ lobby group, said Jan. 27 that the deal was a “landmark moment in global trade relations.”
“It will greatly help European automobile exports enter a market of 4 million passenger cars that, until now, has been protected by prohibitively high import tariffs of up to 110 percent,” ACEA said, urging quick ratification by the EU.
OICA, the international auto constructors’ group, said the pact was a “milestone for European car manufacturers, and the growing market and industry in India.”
CEOs of Volkswagen Group, BMW and Mercedes-Benz said on Jan. 27 that the deal represented an opportunity for Germany.
The agreement “is extremely important for Germany as an export nation, which we want to remain — we are very pleased that things are now moving quickly, that we are expanding multilateral relations rather than cutting them off,” BMW CEO Oliver Zipse told Reuters on the sidelines of a business conference organized by Die Welt newspaper in Berlin.
Mercedes CEO Ola Kallenius told Reuters: “Any move toward opening up markets and strengthening trade, as well as our opportunities to expand our strong export economy, is positive for Germany and positive for Europe.”
VW Group CEO Oliver Blume also welcomed the deal, saying that he supported “every initiative for trade agreements with regions of the world.”
Stellantis said it would not comment on the agreement.
What kind of presence do European automakers have in India?
With rules favoring very high local content, Renault Group, Volkswagen Group and Stellantis have set up local production facilities to build cars from scratch, while the German premium brands largely build cars from kits, with varying degrees of local content.
Renault builds and sells four models in India: The Kwid minicar; the Triber, a small seven-seat SUV; the Kiger, a small SUV; and a version of the new Dacia Duster SUV that is badged as a Renault. Renault Group is buying out Nissan’s stake in the partners’ Chennai factory, where builds the Nissan Magnite, a version of the Kiger.
Stellantis is mainly represented by Citroen, which builds the C3 small car, new Basalt small coupe-style crossover and C3 Aircross small SUV in India, and imports the C5 Aircross compact SUV. It also has an engine factory that exports powertrains to Europe and elsewhere.
Meanwhile, VW’s Skoda brand sells four models: The Slavia compact sedan, Kushaq small SUV, Kylaq mini SUV, all built in India; it imports the Kodiaq compact SUV.
How are European automakers performing in India?
They have largely struggled to make a dent in the market. According to the latest figures from FADA, the Indian auto dealers’ association:
What are the details of the India-EU trade pact for automakers?
European automakers will benefit from an immediate reduction of import tariffs to 35 percent, but other advantages will materialize over the coming decade.