European Union To Allow 2.5 Lakh Indian-Made Cars At 8% Duty Under FTA

The European Union (EU) will allow up to 2.5 lakh Indian-made passenger vehicles to enter its market each year at a concessional import duty of 8 per cent under the proposed India-EU free trade agreement (FTA). The annual quota will gradually increase to 4 lakh vehicles from the 10th year, according to the draft agreement published by the European Commission.

The initial tariff-rate quota (TRQ) applies to Indian-origin internal combustion engine (ICE) passenger cars and hybrid electric vehicles (HEVs) priced at up to €50,000 on a cost, insurance and freight (CIF) basis. 

The agreement was concluded on January 27, 2026, although the published text remains subject to legal revision and will only become binding after both sides complete their internal approval procedures.

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The concessional tariff will be reduced in stages, falling to 6 per cent in the second year, 4 per cent in the third year and 2 per cent in the fourth year before reaching zero in the fifth year. The annual quota will rise gradually from 2.5 lakh vehicles in the first year to 4 lakh from the 10th year. 

Vehicles exported beyond the quota will attract the applicable most-favoured-nation (MFN) duty.

Passenger vehicles priced above €50,000 will not be subject to the same quota. However, the duty on these vehicles will decline from 8 per cent in the first year to zero by the 10th year.

The agreement also marks separate TRQs for battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs) and other passenger vehicle technologies outside the ICE and HEV categories.

For vehicles priced up to €40,000 CIF, the quota will begin in the fifth year with 27,500 units at an 8 per cent duty. It will rise to 60,500 units in the ninth year and reach 1.25 lakh units from the 14th year onwards. The duty will be eliminated from the ninth year.

For vehicles priced above €40,000 and up to €60,000, the fifth-year quota will start at 16,250 units at an 8 per cent tariff. It will increase to 75,000 units from the 14th year, with the duty eventually falling to zero.

A third category covers vehicles priced above €60,000 CIF. The TRQ will begin in the fifth year with 6,250 vehicles at an 8 per cent duty. The quota will rise to 13,250 units in the ninth year and 25,000 units from the 14th year onwards, while the tariff will be removed from the ninth year.

The CIF value used for the tariff structure includes the vehicle's purchase price, freight or shipping costs and insurance up to the EU port of entry.

For Indian vehicle makers, the agreement creates a substantially larger export window into the European market, particularly for vehicles produced in India for international markets. 

The broader trade agreement is likely to be signed later this year and could take effect after the necessary approval processes are completed.