A landmark trade deal between the European Union and India has been lauded as a major breakthrough for Europe’s biggest carmakers, although analysts have flagged competition concerns in one of the world’s fastest growing markets.
The EU and India on Tuesday signed what European Commission President Ursula von der Leyen and India Prime Minister Narendra Modi described as the “mother of all deals.”
The long-pending agreement, which comes as both sides seek to strengthen ties amid U.S. tensions, includes slashing tariffs on imports of EU-made cars to 10% from as high as 110% under a quota of 250,000 vehicles per year.
It represents the biggest opening yet of India’s previously restricted car market to European original equipment manufacturers, with German engineering association VDMA describing it as a “day of celebration for export-oriented mechanical engineering.”
Europe’s Stoxx Automobiles and Parts index traded 1.1% lower on the news, however, with Volkswagen
, BMW and France’s Renault all off by around 1% during afternoon deals.
Michael Field, chief equity strategist at Morningstar, said that in an increasingly volatile environment, any international trade deal is good news.
“The Indian auto market is heavily dominated by domestic players, which will be difficult to disrupt, but this gives European auto manufacturers a fighting chance,” he added.
The deal could also open up a new market for luxury European auto manufacturers, such as Germany’s Porsche, with price points “more affordable” for the middle classes, Field said.
European carmakers, which have been battling crises on multiple fronts in recent months, are set to receive tariff reductions in India that none of Delhi’s other trading partners have received.
To be sure, India represents the world’s third-largest market for passenger cars worldwide and auto industry groups expect tax cuts, particularly for smaller vehicles, to stimulate the country’s market significantly in 2026.
Thilo Brodtmann, executive director of Germany’s VDMA, said the EU-India trade deal will give European manufacturers a much-needed competitive boost, describing India’s car market as one of the world’s fastest-growing and most strategically important.
