Even with reduced duties, she adds, imported European cars are likely to remain priced above the core mass segment, limiting their relevance at the lower end.<\/p>\n
What will change sooner is competitive intensity at the top edge of the mass market. European automakers would gain flexibility to recalibrate pricing, expand model ranges and offer higher specifications. \u201cGreater pricing flexibility may support upper-end variants, faster refresh cycles and stronger feature offerings,\u201d Upadhyay says, lifting benchmarks on safety, technology and brand experience.<\/p>\n
Harshvardhan Sharma, group head for automotive technology and innovation at Nomura Research Institute, says the FTA would not trigger \u201ca sudden influx of inexpensive European cars\u201d, but would alter competitive dynamics over time. \u201cSensitive segments such as small cars are likely to remain protected,\u201d he says, limiting the immediate impact on Indian manufacturers that dominate compact and entry-level models. The bigger implication, he adds, is \u201cbenchmark pressure\u201d, as customer expectations rise in premium SUVs and aspirational segments.<\/p>\n
The FTA is significant because it covers 25 percent of the world population and 25 percent of world GDP. \u201cIn practical terms, Europe gains a new market comparable to the Netherlands (which has lower volumes than 250,000 proposed in the FTA), while India effectively adds an automotive \u2018state\u2019 the size of Maharashtra in demand potential (625,000),\u201d says Ravi Bhatia, president of automotive consultancy Jato Dynamics.<\/p>\n
Duty Cut does not Equal Price Cut<\/h2>\n
Price cuts, however, may be less dramatic than headline tariff reductions suggest. That\u2019s because automakers already absorb part of the duty when they price their models for India and so, any reduction is unlikely to translate into a commensurate drop in sticker prices.<\/p>\n
Grant Thornton\u2019s Mehra notes that European OEMs (original equipment manufacturers) have already taken cumulative price hikes of 15 percent to 25 percent over the past few years due to higher commodity, logistics and compliance costs. A weaker rupee against the euro has also inflated landed costs. \u201cWhile the FTA will reduce headline duties, the pass-through to on-road prices is expected to be measured rather than dramatic,\u201d he says.<\/p>\n
Export Potential<\/h2>\n
Where the FTA becomes strategically interesting is exports. \u201cFor vehicles and components manufactured in India\u2014whether by Indian OEMs or non-European automakers\u2014the agreement could improve competitiveness in Europe if products qualify under the FTA\u2019s rules of origin and meet EU regulatory requirements,\u201d says Nomura\u2019s Sharma.<\/p>\n
There is a critical caveat: Preferential access will depend on how much value addition happens in India and how strictly origin norms are defined.
\u201cIf India-made models can meet EU homologation standards and rules-of-origin thresholds, the FTA could strengthen India\u2019s position as a global small-car and compact-vehicle export hub,\u201d Sharma says.<\/p>\n
For Indian exporters, the upside may not immediately show up in volumes, feels S&P Global Mobility\u2019s Gupta. \u201cThe upside may come more from better profitability than from higher volumes.\u201d<\/p>\n
The domestic industry is looking at the agreement as carefully calibrated. Mahindra Group CEO and MD Anish Shah says the pact \u201clowers in-quota duties only at higher priced segments\u201d, which he argues would \u201cenhance scale in the core segments relevant to Make in India for the world\u201d without changing competitive dynamics in the mass market.<\/p>\n
Shailesh Chandra, president of the Society of Indian Automobile Manufacturers, and managing director of Tata Motors Passenger Vehicles, says the approach should create a \u201cwin-win between increased global participation on one hand and growth of the domestic auto industry with investments and employment on the other\u201d.<\/p>\n
Dealers echo that view. Federation of Automobile Dealers Associations President CS Vigneshwar says more than 95 percent of European OEM sales in India are already locally manufactured. \u201cThis FTA strengthens Make-in-India, expands consumer choice and opens reciprocal export opportunities for Indian OEMs,\u201d he says, pointing to safeguards such as tariff-rate quotas and protections for India\u2019s electric vehicle (EV) road map.<\/p>\n
EVs are outside the agreement for the first few years. This gives domestic manufacturers time to scale platforms and local supply chains without direct import pressure.<\/p>\n
![](\"https:\/\/i3.wp.com\/images.forbesindia.com\/blog\/wp-content\/uploads\/2026\/01\/FTA-impact-2026-01-9d052d228a239094a1460a310cfa54a8.jpg?ssl=1\")
<\/p>\n
Parts Makers See Bigger Prize<\/h2>\n
While the impact on mass-market car sales may be limited, industry executives see deeper implications for auto components. The FTA talks about complete tariff elimination for car parts after five to 10 years.<\/p>\n
Indian suppliers already export billions of dollars\u2019 worth of parts to Europe, with exports of about $3.7 billion in the first half of FY26 alone, according to Grant Thornton. The EU accounts for nearly 30 percent of India\u2019s component exports, according to the Automotive Component Manufacturers Association of India (ACMA).<\/p>\n
\u201cThe phased elimination of duties on components over the next five to 10 years is expected to deepen India\u2019s integration into European value chains,\u201d Mehra says, accelerating opportunities in areas such as electrification, power electronics and advanced materials.<\/p>\n
ACMA President Vikrampati Singhania calls the agreement \u201ca timely and strategic step\u201d that could unlock exports, technology partnerships and long-term investments. \u201cAs global OEMs and suppliers look to build resilient supply chains, a well-balanced and pragmatic FTA can position India as a reliable manufacturing and sourcing partner for Europe,\u201d he says.<\/p>\n
Crisil\u2019s Upadhyay says European OEMs expanding local assembly in India are likely to increase sourcing from Indian suppliers to manage costs and improve supply reliability, translating into higher domestic orders and tighter quality standards.<\/p>\n
Auto component maker Spark Minda says the FTA acts as a catalyst by enhancing export competitiveness and deepening technology collaboration, reinforcing India\u2019s role in global supply chains. \u201cWhile our engagement with European customers has already been strong, the agreement provides additional confidence and momentum to expand partnerships and pursue new opportunities in key markets and creates a clearer runway for export growth,\u201d says Pankaj Uniyal, group head-exports, Spark Minda.<\/p>\n<\/div>\n
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