ECG — 2026-01-29
News from ECG
Republic Day in India, 26.01.2026, marked a new chapter in the country’s economic relationship with the European Union. A Free Trade Agreement was finalised with details released to the press on 27.01.2026. The ‘Mother of all Deals’, is what is being quoted across the nations involved.
The EU India free trade agreement comes into force only after the agreement is approved by the European Parliament.
So what would this FTA mean for the motor industry. The EU states that Motor Vehicles are amongst the top 10 exports to India, accounting for Euro 1.6 billion in EU exports to India. This includes all forms of vehicles, whether cars, trucks, buses, and high & heavy as well as low speed vehicles.
Under terms of the FTA the current import tariffs of 110% on EU made passenger cars would be reduced to just 10% for the first 250,000 units. Meanwhile, in a bid to boost local production in India with European made components, the import tax will be fully abolished for car parts within a 5-to-10-year timeframe.
This is in line with the EU import tariff for all new finished vehicles of a statutory 10%.
To speed up the implementation of this FTA, India will ‘immediately reduce tax’ on cars priced over EURO 15,000. Reuters reports that this will see the current import tax of 110% reduced to 40%, and will begin imminently. Under this scenario, trade will significantly increase between the EU and India, a market where annual new light vehicle sales have surpassed 5 million units, and forecast to increase by another million before the end of the decade.
Using EU trade data from the official data provider Eurostat, the volume of passenger cars exported from the EU to India in the first 11 months of 2025 has reached just 6,373 units. Meanwhile imports into the EU from India are at 3,748 units in the same time frame.
But the outlook dramatically changes with this new trade agreement. As per the latest data provided by ECG’s data partner S&P Global Mobility, we see the outlook for significant growth in trade between Europe and India in the light vehicle sector.
S&P Global Mobility’s Export Module shows that exports from Europe to India are expected to jump 145.9% to hit 12,643 units in 2026, and then rising significantly to surpass 40,000 units per annum in 2029.
Meanwhile exports of light vehicles produced in India, destined for European sales are expected to jump by over 300% in 2026, and will by 2028 surpass the 100,000 unit mark.
Meanwhile sales and production within India are witnessing solid growth. Sales of light vehicles in India are forecast to grow 7.81% in 2026 to reach 5.5 million units. Growth will continue, though at a lower pace till the end of the decade, with sales to exceed 6 million units per annum.
Production of light vehicles in India is expected to surpass the 6 million unit mark this year, giving local production a 7.41% year on year boost.
Production growth is expected to continue in India to surpass the 7 million unit per annum mark by 2029.
For ECG Member and Partner companies, growth in production and sales of passenger cars is music to the ears and therefore should there be adequate interest from our Members, ECG is open to organise dialogue, discussions and delegation to India.
ECG Members & Partners can access the report in the Member Portal on the Website.