India-EU FTA: Why Your Favorite European EVs Won’t Get Cheaper Until 2031

The landmark India-EU Free Trade Agreement (FTA) promises to slash import duties on luxury cars to 10%, but electric vehicles have been hit with a 5-year "waiting period." Here is what EV buyers and manufacturers need to know.

The long awaited India European Union Free Trade Agreement (FTA) has finally been concluded, signaling a seismic shift for the Indian automotive landscape. While fans of high performance internal combustion engine (ICE) cars are celebrating a roadmap toward 10% import duties, the news for the Electric Vehicle (EV) sector is more complex.

For those looking to grab a European made EV at a significantly lower price, the message is clear: Wait.

The 5-Year EV Exclusion Rule

While the FTA aims to reduce the current prohibitive import duties (which sit between 70% and 110%) down to just 10% over the next decade, the Indian government has secured a strategic "lock in" period for electric mobility.

Electric vehicles have been excluded from all duty concessions for the first five years of the agreement. This means that premium EVs from brands like Mercedes Benz (EQ series), BMW (i series), Audi (e tron), and Porsche (Taycan) will continue to attract high import taxes until at least 2031.

Why the Delay? Protecting "Make in India"

The decision to defer EV duty cuts is a calculated move to bolster the domestic EV ecosystem. By keeping import barriers high for another five years, the government is providing a "protection window" for:

• Local Manufacturing: Encouraging European giants to set up local assembly lines (CKD units) rather than just shipping finished cars from Europe.

• Domestic Players: Giving Indian OEMs like Tata Motors and Mahindra time to solidify their dominance in the mid to high end EV segments.

• Supply Chain: Allowing the local battery manufacturing and component industry to mature under the PLI (Production Linked Incentive) schemes.

What Happens After 2031?

Once the five year exclusion period ends, EVs will likely follow a phased duty reduction similar to their petrol and diesel counterparts. However, these will still be governed by a strict quota system.

The agreement caps the total number of discounted European imports at 250,000 units per year across the entire auto sector. Furthermore, the concessions apply only to vehicles priced above €15,000 (~₹1.64 Lakhs), ensuring the entry level Indian EV market remains insulated from European competition.

Impact on the Luxury EV Market

Currently, over 90% of luxury cars sold in India by brands like Mercedes Benz are locally assembled. However, their flagship EV models are often imported as Completely Built Units (CBUs).

Industry experts suggest that this 5 year delay will force European luxury carmakers to make a choice: either accelerate local assembly of their EV portfolios in India now or remain priced out of the reach of many aspirational buyers for the next half decade.

India-EU FTA is a win for the luxury car market, but for the EV revolution, the "Mother of All Deals" is playing the long game.