Cars that are imported as completely built units (CBU) and priced above $40,000 currently face a duty of 110 per cent .Indians expecting luxury cars to get cheaper under the country’s free-trade agreements (FTAs) with the UK and European Union may be in for disappointment. Top executives from Mercedes-Benz, BMW and Jaguar Land Rover (JLR) say the perception that FTAs will slash prices of premium cars is misplaced, though they admit that India may get a higher allocation of vehicles made abroad once trade agreements are signed.
India and the UK signed an FTA in July 2025 that will cut import duties on fully built luxury cars from the UK to about 10 per cent from over 100 per cent , phased in over five years with quotas limiting the number of vehicles eligible for the concessional rate each year. Negotiations with the EU are still under way, with officials indicating that India may offer duty cuts similar to the UK deal. Cars that are imported as completely built units (CBU) and priced above $40,000 currently face a duty of 110 per cent . Industry analysts caution that any price impact will be modest and phased, rather than a sudden sharp reduction.
The India managing director and CEO at German automaker Mercedes-Benz Santosh Iyer said even with these agreements, dramatic price drops are unlikely. “It’s a complete misconception that European cars will suddenly become ₹30-₹40 lakh cheaper. Ninety-five percent of the cars we sell are locally produced, so they aren’t impacted by import duties in the first place,” Iyer told ET.
The main benefit of FTAs would be in improving the business case for more niche models, he said. “Currently, India competes with other markets for limited production slots of fully imported cars. If FTAs lower duties even slightly, our business case improves, and we can push for higher allocations-meaning customers will get their imported cars faster.”
JLR India MD Rajan Amba said most of the Tatas-owned British automaker’s portfolio is localised in Pune and thus unaffected by FTAs from a pricing standpoint. “Once we explained to customers that 95 per cent of our line-up is not impacted, bookings returned to normal levels,” Amba said. “But FTAs will definitely help us strengthen our case for bringing in more CBUs and special editions, since lower duties improve margins.”
BMW Group India president and CEO Hardeep Singh Brar also stressed that the current environment of reduced GST and festive offers represents one of the best windows to buy. “Our focus is to pass on GST benefits now and deliver cars during the festive season. FTAs, even when they materialise, won’t have a dramatic effect on final customer prices,” said the India head of the German luxury-car maker.
After a record 2024, when luxury car sales in India topped the 50,000 mark for the first time, sales in the first half of 2025 were muted as stock market volatility and geopolitical uncertainties weighed on buyer sentiment. Analysts say the bigger story this quarter is demand, not duties. With GST cuts, financing support, and buyers advancing purchases before likely January price hikes, luxury carmakers expect this festive season to be a record one for the segment. “India could get more niche and performance models thanks to better allocation economics-but mainstream luxury prices are unlikely to crash,” said a Mumbai-based auto sector analyst.
