The India-European Union trade deal has raised concerns around its possible impact on the Indian automobile sector. However, early analysis from global brokerages suggests that the effect on most carmakers may remain limited, at least in the near to medium term.
A key part of the. Under the deal,, known as completely built units, could be cut sharply from around 110% to nearly 40% in the initial phase.
At first glance, this appears to be a major change, but its impact is narrower than it seems.
Most mass-market European carmakers do not rely heavily on fully built imports in India. Companies such as Volkswagen, Skoda and Renault assemble their vehicles locally using completely knocked-down kits.
These kits already attract a much lower duty of around 17%, and this duty is not expected to change under the trade deal. As a result, popular models from these brands are unlikely to see any meaningful price cuts.
The biggest benefit from the duty reduction is expected to be limited to niche luxury imports. High-end brands such as Porsche and Lamborghini, along with premium models from Audi and BMW, import several vehicles as fully built units.
These cars could become more affordable if duties are reduced, but their volumes remain small in the overall market.
The analysis also looks at the
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Goldman Sachs (GS) has assessed the impact of the India-EU FTA tariff reductions on Indian automakers, particularly Mahindra & Mahindra (M&M) in the premium segment.
A €15,000 European car would now land in India at roughly Rs 23.2 lakh under the new duty structure, directly competing with M&M models like the XUV700 and Scorpio-N priced above this level.
About 12.9% of M&M’s domestic passenger vehicle volumes fall in this Rs 23 lakh and above bracket, higher exposure than peers (Hyundai 8.7%, Tata PV 2.8%, Maruti 0.2%).
However, M&M’s passenger car business contributes only ~30% of its overall profit after tax (PAT), with tractors, financial services, and other segments making up the rest, limiting overall risk.GS’s profit impact estimates (from volume drops in the affected premium segment) are modest:
Even in a worst-case scenario, GS views the overall profit pressure on M&M as limited due to its diversified earnings base.
Brokerage estimates show that even in a severe scenario where sales of Mahindra cars priced above Rs 23.2 lakh drop by 50%, the impact on overall profits would be less than 2%. Even a complete loss of volumes in this segment is estimated to reduce profits by under 4%.
Overall, the assessment suggests that worries around the India-EU trade deal disrupting the Indian auto sector may be overdone. While luxury car imports could gain from lower duties, mass-market carmakers and large Indian players are unlikely to see any major impact on prices or profits in the near term.