Just last month in Brussels, the European Automobile Manufacturers’ Association (ACEA) welcomed the conclusion of negotiations for a free trade agreement (FTA) between the European Union (EU) and India.
So What Are The Key Implications For The Auto Industry:
1. Tariffs on EU-manufactured cars drop to 10% (within a 250,000-unit annual quota), making premium brands like Mercedes-Benz, BMW, and Audi more accessible.
2. Import duties on auto parts will be fully removed in 5-10 years, aiding local assembly and reducing maintenance costs for European cars in India.
3. The deal breaks down protectionist barriers, forcing domestic (Tata, Mahindra) and Japanese (Maruti Suzuki) manufacturers to enhance technology and quality to remain competitive.
4. Indian consumers can expect 20-30% price reductions on European luxury vehicles.
5. The deal provides significant, long-sought access to the growing Indian automotive market.
The successful end to negotiations is a landmark moment in global trade relations. Running contrary to the global trend, this FTA is a strong statement of intent by both parties to furthering more open and mutually beneficial 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%.
The agreement does come with important restrictions such as quota limitations and residual tariffs that will limit the potential benefit to some extent. However, a full assessment of the detailed terms of the deal will begin once the texts are published in the coming weeks.
ACEA members support this FTA and will ask EU member states and the European Parliament to give their timely approval to allow for its implementation as soon as possible.
