European carmakers, squeezed
by U.S. tariffs and price wars in China, will get a welcome
boost from an EU-India trade deal that sharply drops tariffs on
car imports, but face a tough market dominated by homegrown
firms and compact Japanese “kei cars.”
India and the European Union are set to sign a trade deal on
Tuesday, including slashing tariffs on imports of EU-made cars
to 40% from as high as 110%, the biggest opening yet of India’s
vast market for Volkswagen and Renault.
The move, however, only edges the door open, analysts said,
with local car brands and Asian rivals Suzuki Motor and
Hyundai dominating the market, with hot-selling
models like the Maruti Suzuki Wagon R kei car – a class of
pint-sized, affordable vehicles smaller than a Mini Cooper.
“It’s a start. When we talk about exports from Europe, it’s
only about premium cars. For the volume sector it is difficult,”
said Stefan Bratzel of German auto research group CAM, who said
Suzuki and Hyundai had better understood the market.
“In India it’s about cheap, reliable, stable cars. The
Volkswagen Group cars have been too expensive. Suzuki has
benefited from the kei cars which are highly popular in Japan.”
Eu carmakers have less than 3% share of the market
With a modest production footprint and annual sales still in
the tens of thousands of cars, European brands have huge room to
expand after losing market share in the last decade.
European carmakers hold under a 3% share of India’s car
market, Indian automobile industry data shows. The South Asian
country’s market is dominated by Suzuki Motor and homegrown
brands Mahindra and Tata, which together hold
two-thirds.
India has the world’s third-largest car industry after the
U.S. and China, but its 4.4 million-vehicles-a-year domestic
auto market has been one of the most protected, with current
levies of 70% and 110% on imported cars.
“India is a dynamically growing market and of considerable
strategic importance to the Volkswagen Group,” a spokesperson
for the carmaker which controls Audi, Porsche and
Skoda said, adding it would look at the business impact from the
trade deal.
Mercedes-Benz said reduced tariffs should boost
carmakers from both regions. BMW declined to comment.
Warburg Research analyst Fabio Hoelscher said a cut to 40%
would make luxury European carmakers more competitive.
“The biggest winners versus before are brands like Porsche
who import their entire portfolio as completely built units,” he
said, though he cautioned the move would take time to boost
profits, while ongoing U.S. uncertainty would temper shares.
“After that, in the medium term, there is potential to
expand local manufacturing.”
India car market has big potential for growth
High U.S. import tariffs and a cut-throat market in China
have pushed many automakers to consider new growth markets such
as India, where the market is expected to grow by over a third
to 6 million vehicles a year by 2030.
Prime Minister Narendra Modi’s government has agreed to cut
the tariff rate on a limited number of cars from the 27-nation
bloc with an import price of more than 15,000 euros ($17,739),
two sources briefed on the talks told Reuters.
This will be further lowered to 10% over time, they
added.
ING Research analyst Rico Luman was bullish, saying that an
EU-India trade deal “could turn into a significant opportunity
for European car makers” in the medium run.
“The Indian car market is still in the early stages of
maturing, which means there is substantial growth potential,”
Luman said.
Published on January 27, 2026
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