India and the European Union have signed a major Free Trade Agreement (FTA) that could significantly reduce import duties on fully imported cars. Naturally, this announcement has sparked excitement among car enthusiasts and luxury car buyers across the country.

But before you start planning your next purchase, here’s a simple explanation of what the IND–EU FTA really means — and what impact it may have on car prices in India.

When Will the Agreement Take Effect?

The changes will not happen immediately.

Although the agreement has been signed, it still requires several legal and regulatory approvals. The reduction in import duties is expected to be implemented in phases and could take one to two years before it reflects meaningfully in showroom prices.

At present, fully imported vehicles attract an import duty of around 110 percent. Under the FTA:

• Duties may initially reduce to around 40 percent
• Eventually, they could drop further to as low as 10 percent

Which Cars Will Become Cheaper?

Only Completely Built Unit (CBU) vehicles will benefit from the reduced tariffs.

This means:

• Cars fully manufactured and assembled outside India will qualify
• Vehicles assembled in India will not see direct price benefits

Most luxury brands such as Mercedes-Benz, BMW, and Audi already assemble their high-volume models locally. As a result, popular sedans and SUVs from these brands are unlikely to become cheaper.

The real benefit will be seen in niche and performance-oriented models such as:

• BMW M3 and other M models
• Mercedes-AMG performance range
• Audi RS models
• Porsche 911 and other sports cars
• Volkswagen Golf GTI and Skoda Octavia RS

How Much Price Reduction Is Possible?

If import duty drops from 110 percent to 40 percent, prices of fully imported cars could reduce by up to 30–35 percent.

For example:

• A car priced at ₹1 crore today could drop to around ₹65–70 lakh
• If duties reduce further to 10 percent, prices could approach ₹50 lakh

These figures are indicative. Actual prices will depend on factors such as manufacturer margins, exchange rates, and possible additional taxes.

What Does This Mean for Buyers?

The biggest advantage of the IND–EU FTA is increased access to global car models.

Cars that were previously considered too expensive as full imports may now become realistic options. Buyers can expect:

• Better technology and safety features
• More performance and enthusiast-focused vehicles
• Greater variety in the premium segment

Mass-market European brands such as Volkswagen, Skoda, and Renault may also find it easier to introduce international models that were earlier not financially viable.

Impact on Parts and Components

The agreement also includes a long-term plan to reduce tariffs on imported auto parts and components over the next 5 to 10 years.

This could result in:

• Lower spare-part costs
• Access to higher-quality European components
• Improved overall quality of vehicles manufactured in India

CBU vs CKD: Quick Explanation

• CBU (Completely Built Unit): Vehicle imported fully built from another country
• CKD (Completely Knocked Down): Vehicle assembled in India using imported parts

Only CBU vehicles are directly impacted by the FTA tariff reduction.

Final Thoughts

Do not expect luxury cars to suddenly become affordable overnight. A dramatic price drop across all premium brands is highly unlikely.

However, the IND–EU FTA opens the door to a more competitive and exciting future. Manufacturers may experiment with new body styles, performance variants, and global models without the burden of extremely high import duties.

For now, both the industry and buyers will be watching closely as the agreement gradually moves from paper to reality.