European Cars May Get Cheaper: Impact on Indian Market?

The buzz around European Cars getting cheaper in India has caught the attention of car buyers, auto enthusiasts, and investors alike. With trade discussions, tariff rationalisation, and stronger India Europe economic ties in focus, many are asking a simple question. Will European cars actually become more affordable in the Indian market, and what does this mean for consumers and the auto industry?

Let us break this down in a clear, practical way.

What’s Happening With European Cars in India?

India’s automobile market is the third largest in the world, selling around 4.4 million vehicles annually. For decades, India has protected its auto industry with high tariffs on imported vehicles, sometimes as much as 70% to 110%. These steep duties have made most European Cars very expensive in India and kept imported models out of reach for many buyers.

Now, as part of ongoing trade talks between India and the EU, the government is considering cutting tariffs on imported cars from up to 110% to 40% immediately for select vehicles priced above €15,000 (around ₹13.5 lakh), with phased reductions to as low as 10% over time. This would be one of the most significant openings of the auto market in India’s history.

Why This Matters for Price and Accessibility

Lower tariffs could directly affect the pricing of European Cars in India, especially pricier premium and luxury models.

Possible Price Reductions

• For a car that currently costs ₹45 lakh ex-showroom, duties falling from 110% to 40% could reduce the tax component dramatically, potentially bringing the price down by ₹10-₹50 lakh, depending on model and local levies.

• Luxury names such as Mercedes-Benz, BMW, Audi, and Volkswagen could see their imported models become substantially more competitive against locally assembled rivals.

Example

A Mercedes model priced at ₹45 lakh could drop into a higher accessible range for more buyers. On models that now cost ₹40-50 lakh, projected cuts could bring prices closer to ₹30-40 lakh or even lower in some cases.

Lower tariffs could also make large European SUVs, sedans and performance cars, often seen as aspirational purchases, more affordable to India’s growing upper middle class.

Current Market Share and Sales Reality

Despite the optimism around tariff cuts, European brands currently have a modest presence in India’s passenger vehicle market:

• European automakers hold under 4% of the Indian car market, which is dominated by brands such as Maruti Suzuki, Hyundai, Tata and Mahindra.

Sales data from recent years also shows struggles for several mass-market European brands:

• Renault’s sales in India dropped to 37,900 units in 2024-25 from 78,926 units in 2022-23.

• Volkswagen sold 42,230 vehicles in 2024-25 - a decline from prior years.

• Skoda’s sales were 44,866 units in 2024-25 down from 52,269 units in 2022-23.

These numbers indicate that even before tariff changes, European Cars have found it difficult to grow in India due to pricing, product mix, and market preferences.

How Lower Prices Could Change Buyer Behaviour

1. More Accessible Premium Options

With lowered tariffs, premium cars that once felt out of reach could become attainable for a broader segment of buyers. This does not mean mass-market pricing, but it could shift pricing closer to high-end local offerings.

2. Potential Shift Toward Luxury and Tech

India’s car market is projected to grow to nearly 6 million units a year by 2030. If European Cars become more affordable, they could capture a larger slice of the upper price bands of this expanding market.

3. Improved Competition for Domestic Brands

European manufacturers would bring advanced safety, technology and performance benchmarks. Increased competition could help elevate standards across the industry and give Indian consumers more choices.

Impact on Indian Automakers

Pressure on Local Manufacturers

Domestic brands like Tata Motors and Mahindra have traditionally competed fiercely in SUVs and utility vehicles. With cheaper European competition, they may need to:

• Accelerate innovation
• Improve technology and features
• Rebalance pricing and product strategy

However, tariff changes are expected to be phased carefully to maintain incentives for local manufacturing, especially in electric vehicles, which remain excluded from cuts for the first five years in some proposals.

Potential for More Local Assembly

European automakers may also expand local assembly or Completely Knocked Down (CKD) operations to benefit from lower duties and improve pricing further.

Long Term Outlook

1. More Investments

Reduced tariffs could encourage European automakers to invest more in India, including:

• Local assembly plants
• R&D centres
• Supply chain partnerships

2. Broader Product Mix

Expect a wider range of models, from premium SUVs to electric and performance cars, if costs become competitive.

3. Evolution of Consumer Preferences

Indian buyers may start valuing brand prestige, advanced safety and performance features more as European Cars become easier to price into buying consideration.

Conclusion

• Potential tariff cuts could make European Cars more affordable in India
• Import duties could fall from 110% to around 40%, leading to meaningful price savings in premium segments.
• Import duties could fall from 110% to around 40%, leading to meaningful price savings in premium segments.
• Premium and luxury segments may see the biggest price impact
• Indian buyers get more choice, better value, and access to global technology
• Domestic brands face stronger competition and faster innovation cycles
• The Indian auto market could become more dynamic, global, and consumer focused

You Might Find Interesting - Multi Asset Allocation Fund: Importance & Best Funds to Invest

FAQs

1. Will European Cars definitely become cheaper in India?

Not immediately. Tariff cuts are subject to trade deal negotiations and phased implementation. But proposed reductions could significantly reduce prices over time.

2. What percentage of the Indian car market do European automakers currently hold?

European brands hold under 4% of the Indian car market, dominated by local and Japanese brands.

3. How much could import tariffs be reduced?

Tariffs could drop from as high as 110% to around 40% initially, with longer-term plans to reduce to about 10%.

4. Will electric European Cars also be cheaper?

In the early years of tariff reduction, electric vehicles may be excluded for five years to protect local EV investments.

5. How might this affect prices of specific models?

Premium models could see price reductions from ₹10 lakh up to ₹50 lakh, depending on the original price and tax savings.