The EU-India agreement will reduce taxes on European cars imported into India
- The trade agreement between the European Union and India aims, among other things, to reduce import duties on European cars from 110% to 40% initially, and then to 10% subsequently. European cars will therefore see their prices decrease by approximately 25% initially, and again by approximately 25% subsequently, representing a total price reduction of 50% for these cars, which are currently subject to a 110% tariff. Conversely, since European duties are currently set at 10% on imported Indian cars, no tax reduction is planned for them.
- The Indian market is currently dominated by small cars (A and B segment vehicles account for 64% of total sales), with the Japanese carmaker Suzuki holding 41% of this market. The few imported cars (approximately 10,000 per year, half of which come from Europe and are primarily BMW, Mercedes, and Audi) are mainly premium vehicles. This is because the wealthiest classes in India can afford the 110% surcharges on already expensive high-end cars, but the middle class cannot afford standard cars from mainstream carmakers, many of whom also produce in India, such as Renault or Citroën.
- However, there is relatively high demand in India for high-end cars, but a large portion of the market cannot afford them due to prohibitive prices. Lower taxes on these cars will allow this premium market to grow in India. The carmakers that stand to gain the most will be the premium brands, primarily BMW, Mercedes, and Audi, with sales capped at 250,000 per year by the agreement. This translates to approximately 80,000 additional sales for each of these three carmakers in the long term.