India and EU Signed Free Trade Agreement
The deal establishes reciprocal automotive import quotas and tariffs for Indian and European markets.
Updated on Sept. 21, 2026 in International Trade
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India and the European Union have signed a free trade agreement to regulate automotive imports and exports. The deal establishes phased tariff reductions and quota systems for internal combustion engine and hybrid vehicles between the two regions.
Why it matters
This agreement aims to expand market access for Indian vehicle manufacturers in Europe while securing entry for European brands in India. A strategic four-year delay on European electric vehicle access was included to protect India's domestic electric car industry.
The agreement grants an initial quota of 100,000 European vehicles into India and 250,000 Indian vehicles into the EU, scaling to 160,000 and 400,000 respectively by Year 10. Additionally, India secured an annual steel export quota of 694,853 tonnes.
The players
India
India is a major South Asian nation and global automotive manufacturing hub seeking expanded export markets.
European Union
The European Union is a political and economic union of 27 member states serving as a primary global trade bloc.
Maruti Suzuki
Maruti Suzuki is a leading Indian automobile manufacturer and a major exporter in the global automotive market.
The details
The pact mandates specific rules-of-origin requirements for all vehicles qualifying for preferential access. While tariffs for Indian ICE and hybrid exports to the EU will drop to zero by the fifth year, in-quota duties for European imports into India will decrease to 10 percent within the same timeframe.
Timeline
In 2025, India imported 17,191 cars from the European Union.
During FY26, Maruti Suzuki recorded 447,774 total vehicle exports.
Year 1 marks the start of initial automotive quotas.
Year 5 is when tariffs on Indian ICE vehicles reach zero percent.
Year 10 serves as the deadline for automotive quotas to reach their maximum levels.
Market Dynamics
This agreement follows the structural framework established by the European Union-India Free Trade Agreement. The deal aligns with broader global trends of regional trade bloc expansion and the protection of nascent domestic electric vehicle industries.
Retail and institutional investors should monitor how the removal of tariffs by Year 5 impacts the profit margins of major exporters like Maruti Suzuki. Additionally, the exclusion of vehicles priced below 15,000 euros may shift regional inventory strategies for European carmakers.
The takeaway
The deal signals a significant shift in automotive trade relations, prioritizing phased integration to balance market access with domestic industrial protection. Readers should note that tariff-free access for Indian vehicles will not be fully realized until the five-year milestone.
Further reading
Explore more developments in International Trade on our global insights page.
Source note: This article includes information reported by Rediff.com India Ltd..
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