Auto stocks Tata Motors, Mahindra & Mahindra (M&M), and Maruti Suzuki India fell up to 5% on Tuesday’s session on fears of increased competition from India-EU FTA.
According to reports, the European Union is expected to make progress in areas such as automotive and technology products as part of the India-European Union Free Trade Agreement, while Electric Vehicles, Internal Combustion Engines (ICE), and Heavy Commercial Vehicles will have distinct quotas.
The import duty on cars from the European Union is set to decrease to between 30% and 35%, down from the current rates of 66% to 110%.
Additionally, India will gradually reduce the in-quota duty over five years, eventually reaching a rate of 10%.
Seema Srivastava, a Senior Research Analyst at SMC Global Securities, stated that India’s move to reduce import tariffs on cars from the EU is expected to shake the auto sector. European luxury car manufacturers such as Volkswagen, Mercedes-Benz, and BMW are anticipated to gain advantages by offering vehicles at more competitive prices.
“Local dealerships and service providers will also see a boost. However, domestic players like Tata Motors and Mahindra & Mahindra may face increased competition in the luxury segment,” said Srivastava.
Bhavik Joshi, the Business Head at INVasset PMS, pointed out that currently, India has high import duties on completely assembled passenger cars, which can frequently exceed 60–100% based on the engine size and vehicle valuation.
Joshi indicated that the proposed framework between India and the EU does not plan for an immediate removal of these barriers. Rather, it is anticipated that tariff adjustments will occur gradually, likely varying by vehicle valuation categories, engine specifications, and possibly limited by annual quotas.
He believes that luxury and high-end vehicles are expected to receive earlier relief, while vehicles in the mass-market segment might remain protected for a longer period.
