Electric vehicle buyers and automakers could eventually benefit from lower import duties under a proposed trade agreement between India and the European Union.

The plan would gradually expand access for qualifying vehicles moving between the two markets, potentially making international competition stronger and giving manufacturers more options for selling their cars abroad.

How the Proposed Agreement Would Work

The European Commission has published tariff schedules outlining how electric vehicle imports could receive preferential treatment under the proposed India-EU Free Trade Agreement. The plan sets annual limits on eligible vehicles and reduces import duties in stages rather than opening both markets fully from the beginning.

The combined annual allowance for qualifying electric vehicles could eventually reach 315,000 units across the two markets. That figure represents a later stage of the plan, not the number of vehicles that would automatically qualify as soon as the agreement begins.

Under the proposed schedule, tariff reductions for eligible electric vehicles would start in the fifth year of implementation. The gradual approach gives manufacturers time to plan production, distribution, and export strategies while allowing each market to retain limits on the number of vehicles receiving reduced duties.

What European Buyers Could Gain

The European Union's proposed terms would allow up to 50,000 qualifying vehicles made in India to enter the EU at an initial preferential tariff of 8% in the fifth year. The category includes battery-electric vehicles, plug-in hybrids, and certain other passenger vehicles, while conventional combustion-engine cars and non-plug-in hybrids are excluded from this specific quota.

The allowance would be divided into three price categories based on the vehicle's cost, insurance, and freight value. Up to 27,500 vehicles could fall into the category valued at €40,000 or less. Another 16,250 could be valued above €40,000 and up to €60,000, while 6,250 could exceed €60,000.

After the initial reduction, the proposed tariff would fall by two percentage points each year, reaching zero in the ninth year. The annual quota would also grow over time, eventually reaching 225,000 vehicles from the fourteenth year onward.

How India Plans to Adjust Its Tariffs

India's proposed terms are more restrictive in the early stages. In the fifth year, the country would reduce the import duty on a quota of up to 20,000 qualifying electric and plug-in hybrid vehicles from the EU to 30%, compared with rates that can currently reach 110%.

Unlike the European proposal, India's concession would exclude cars with a cost, insurance, and freight value below €20,000. The quota would be divided among vehicles valued from €20,000 to below €40,000, from €40,000 to below €60,000, and at €60,000 or above.

The proposed duty would then decline by four percentage points annually, falling from 30% in the fifth year to 10% in the tenth year. India's annual allowance would gradually increase, reaching up to 90,000 vehicles from the fourteenth year.

What the Changes Could Mean for Carmakers

A more predictable route between the two markets could influence where manufacturers build vehicles and how they plan export operations. Indian producers seeking customers in Europe could gain access to a larger market, while European brands could have more opportunities to offer qualifying electric models in India.

Competition may also encourage manufacturers to review pricing, equipment, and product choices. Still, lower import duties do not guarantee cheaper vehicles. Companies must account for transport, local distribution, taxes beyond the preferential tariff, and the cost of meeting market requirements.

The quota system is also important. Manufacturers would need to consider how many vehicles qualify, the applicable price category, and the year in which the shipment takes place. The headline figure of 315,000 vehicles should therefore be understood as a long-term combined limit, not a guaranteed annual flow from the start.

Approval and Timing Still Matter

The proposed agreement has not yet entered into force. Following the publication of the tariff schedules, the EU still needs to complete its required approval procedures, and India must also finish its own ratification process. The two sides have indicated an aim to sign the agreement by the end of 2026, with implementation potentially following in 2027, subject to the necessary steps being completed.

For manufacturers, the plan could offer new export opportunities and a clearer basis for long-term planning. For buyers, any effect on prices will depend on how companies respond to lower duties and whether the agreement is approved and implemented as proposed. The most important development to watch is not just the final quota, but how quickly the new terms become effective and how manufacturers use them.