Decoding the EU-India FTA: Automotive & Metals

Last month, the European Union and India concluded over three years of negotiations on a long-awaited deal for a Free Trade Agreement. Across automotive, steel, chemicals, plastics, pharmaceuticals, and agri-food, the emerging EU-India trade agreement has the potential to significantly reshape trade flows between two major industrial powers.

Following the first part of our series on the EU-India FTA focused on pharmaceuticals, our next installment considers provisions related to the automotive and metals industry.   

Automotive

Francesca Rinaudo, Account Director, FleishmanHillard EU

The automotive provisions strike a balance between gradual market opening and the continued protection of domestic industry on both sides. 

India’s current tariffs on cars, reaching up to 110%, have long been a central obstacle for European manufacturers. Under the agreement, these duties will fall to 10% within a quota of 250,000 vehicles per year. Tariffs on combustion engine vehicles will drop to around 30-35% from year one, with liberalisation on electric vehicles beginning only after five years – a delay reflecting India’s desire to shield its emerging electric vehicle (EV) industry. 

In turn, the EU will introduce a quota ranging between 160,000 conventional vehicles and around 90,000 electric vehicles, alongside full liberalisation for all car parts and an additional quota for so-called “completely knocked down” kits (i.e., unassembled sets of vehicle parts exported for local assembly in destination country). A review clause would allow both sides to reassess conditions of the deal in the future based on the evolution of car markets, specifically related to developments in the steel sector.  

While these provisions strike a balance between liberalisation and domestic industry protection on both sides, European automotive manufacturers remain among the most skeptical of the outcomes. Concerns persist over residual quotas, limited flexibility, and remaining tariffs, which could constrain the agreement’s commercial potential in India’s fast-growing and highly competitive market. 

Prateek Sharma, Senior Vice President, FleishmanHillard India  

The agreement could become an inflection point for India’s auto ecosystem, opening access to premium markets while pulling advanced technologies into India’s manufacturing base and strengthening India’s integration with global automotive value chains. 

For India’s automotive and auto component industry, the agreement can improve export access to the EU for components, electric vehicle (EV) sub-systems, lightweight materials, electronics, and precision-engineered parts by lowering tariffs and easing technical barriers. This will strengthen India’s position as a global sourcing hub for cost-competitive, high-quality auto parts, especially as European manufacturers diversify supply chains.  

The biggest impact will be seen in the ultra-luxury segment, where duty cuts improve the viability and availability of top-end models. Most luxury brands are already localizing in India, so mainstream luxury prices may not change much. Sharp price drops are unlikely due to brand protection, currency impact, and costs. The real near-term gain will be better allocations and a wider choice of premium models for India. 

The FTA opens new export opportunities for Indian manufacturers like Mahindra and Tata Motors in select European markets, especially Southern and Eastern Europe. Indian auto component makers can also plug deeper into European supply chains, upgrading quality and technology standards. Over time, this helps India move from being just a low-cost hub to a more capability-led, globally integrated auto ecosystem. 

While near-term pressure may be felt by cost-focused segments, the medium-term upside lies in faster capability building, stronger integration into EU-led global value chains, and accelerated readiness of India’s auto sector for the EV, connected, and low-carbon mobility transition. 

Metals

Alessandra Botta, Account Director, FleishmanHillard EU

The agreement opens India’s metals market while balancing liberalisation with strategic safeguards, keeping Indian metals exports to the EU subjected to CBAM to safeguard the level playing field for Europe’s domestic industry.

While product‑specific tariff schedules remain to be confirmed in the final text, the agreement outlines tariff elimination or significant reduction for most metals traded between the EU and India. We expect most tariffs to be fully liberalised for certain products, such as iron and steel and aluminium, over a short period of time. 

It is worth noting that the EU is one of the largest destinations for (carbon-intensive) Indian steel and aluminium exports. While discussions on duty-free steel export quotas for Indian metals entering the EU market are to be expected, no exemption or preferential treatment under the Carbon Border Adjustment Mechanism (CBAM) was granted as part of the FTA.  

This answers calls from European ceramic, aluminium, ferro‑alloys and steel producers in the EU for protections against market distortions that could endanger EU industry and undermine decarbonisation investments. However, while the agreement may ease certain tariff‑related frictions, it is unlikely to fully address these structural concerns, as the Indian Federal Steel Secretary recently announced government measures to support the steel sector against CBAM’s impact. 

This article is the second part in our series analysing the EU-India FTA. Stay tuned for more insights.