India offers EU auto quota six times larger than UK deal

Core Insights - The trade agreement between India and the European Union will allow up to 250,000 European-made vehicles to enter India at preferential duty rates, significantly higher than the previous quota of 37,000 units for the UK [1][16] - The agreement includes a phased reduction of import duties for internal combustion-engine cars to 10% within five years and for electric vehicles to be implemented by the 10th year [1][16] - The deal reflects a strategic reset in trade relations, providing Europe with access to India's growing auto market while allowing India to enhance its automotive exports and manufacturing capabilities [7][16] Vehicle Quotas and Tariffs - The agreement allows for 160,000 internal combustion-engine vehicles to have duties reduced to 10% over five years, while 90,000 electric vehicles will see duties reduced by the 10th year [1][16] - Beyond the quota, a rate cut to 35% over 10 years for fossil-fuel powered cars has been negotiated, down from current tariffs as high as 110% [2][10] - The EU will offer Indian automakers import concessions covering up to 625,000 vehicles, reflecting the relative market sizes [8][16] Review and Future Negotiations - A review clause in the pact allows for periodic reassessment of quotas to align with India's expanding auto market and future trade negotiations, particularly concerning steel [6][16] - The agreement is designed to provide leverage for both sides in future negotiations, particularly as India seeks to balance its trade relationships [6][7] Impact on Manufacturers - Major manufacturers such as Volkswagen AG, Mercedes-Benz Group AG, Stellantis NV, and Renault SA are expected to benefit from the larger quota and reduced tariffs [5][16] - European carmakers will be allowed to export up to 75,000 cars annually for assembly in India from completely-knocked-down kits, with tariffs reduced to 8.25% from 16.5% [11][16] - Duties on car parts will be eliminated, promoting deeper supply-chain integration between Europe and India [12][16] Limitations and Market Access - The agreement does not represent a complete market opening, as constraints remain, particularly regarding India's demands related to steel [13][16] - New EU regulations may limit India's effective access to the market despite the agreement being in place [13][16]