The country’s largest-ever FTA is expected to boost shipments of electric vehicles and auto parts, lower costs for imported technology and machinery, and encourage joint ventures and technology partnerships between Indian manufacturers and European vehicle makers, industry executives said.Multinational automakers operating in India could increasingly use the country as an export base for both electric and internal combustion engine (ICE) vehicles, while the largest long-term gains would accrue to auto component suppliers, they said.
The proposed FTA could materially improve market access for Indian suppliers and accelerate their integration into European value chains, said Prasanth Doreswamy, president and CEO of Continental India, a technology and mobility solutions firm. “Lower tariffs and clearer trade rules will help Indian suppliers integrate more deeply,” he said.
India exported $3.73 billion worth of auto parts to Europe in the first half of FY26, an increase of about 11% over $3.36 billion in the year-ago period, making it the largest destination ahead of the US, Asia and Latin America, according to data from Automotive Component Manufacturers Association of India (ACMA).Indian auto parts makers are facing growing uncertainty in the US-their single-largest overseas market-amid tariff-related pressures. Industry executives said long-term export orders from the US have slowed as automakers remain cautious about future sourcing plans following higher duties imposed under Section 232 and reciprocal tariffs announced last year.”On the face of it, the biggest opportunity is for exports to Europe and integration into the European supply chain,” Doreswamy said.
Vinnie Mehta, director general of ACMA, said the pact would help Indian suppliers scale globally. “The India-EU FTA can catalyse the next phase of growth for India’s auto-component industry by enabling technology collaboration, greater export competitiveness and long-term investment flows,” he said.
Indian vehicle makers have already begun scaling up their European play. Maruti Suzuki has shipped more than 13,000 units of its electric SUV e-Vitara to 29 countries, largely in Europe. Royal Enfield and Hero MotoCorp have also announced plans to expand their electric vehicle footprint on the continent.
While details of the agreement are still awaited, sources said India and the EU have arrived at quota-based mutual concessions for vehicles, along with phased reductions in duties on auto parts. Some of these cuts are expected to be implemented immediately, others in the medium term, and a third set over a longer horizon of up to 10 years, when duties could fall to zero.
G K Sharma, chairperson, India region at OPmobility, an automotive supplier and technology partner, said the agreement could spur fresh investment and joint development activity.
“Europe is under cost pressure, and India offers a competitive manufacturing and engineering base. This agreement strengthens India’s position as a long-term partner for production, technology and joint development,” he said.
India currently accounts for around 3% of global trade in advanced auto parts. The government has urged the industry to increase component exports to $60 billion-from $20.1 billion in FY23-and vehicle exports to 25% of total output-from about 14% in FY23-by 2030.
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