EU carmakers face tough India market even after trade deal

• European carmakers currently hold less than 3% of India's market, while local brands Mahindra and Tata control two-thirds, alongside strong competition from Suzuki and Hyundai's popular compact 'kei cars'
• India's car market is the world's third-largest at 4.4 million vehicles annually and is expected to grow over a third to 6 million units by 2030
• The tariff reduction applies to a limited number of cars priced above 15,000 euros, primarily benefiting luxury brands like Porsche that import fully-built vehicles, though profit impacts will take time amid ongoing U.S. market uncertainty

Summary

The European Union and India are set to sign a trade deal on Tuesday that will reduce tariffs on EU car imports from as high as 110% to 40%, with further cuts to 10% planned over time. The tariff reduction applies to vehicles with an import price exceeding €15,000 ($17,739).

Key Market Context:

India operates the world's third-largest automotive market, producing 4.4 million vehicles annually, with expectations to grow to 6 million units by 2030—representing over 33% growth. However, European carmakers currently hold less than 3% market share, facing fierce competition from local brands Mahindra and Tata Motors, which control two-thirds of the market, alongside dominant Asian players Suzuki Motor and Hyundai.

Companies Affected:

Primary beneficiaries include Volkswagen Group (including Audi, Porsche, and Skoda), Renault, Mercedes-Benz, and BMW. Warburg Research analysts identify Porsche as a potential major winner, as the brand imports its entire portfolio as completely built units.

Market Challenges:

Despite reduced tariffs, European brands face significant hurdles. Indian consumers favor affordable, compact vehicles like Suzuki's hot-selling Maruti Suzuki Wagon R "kei cars"—smaller than a Mini Cooper. European vehicles have historically been too expensive for the volume market segment.

Strategic Implications:

The deal provides European automakers, currently squeezed by U.S. tariffs and Chinese price wars, access to a high-growth emerging market. Analysts view this as a medium-term opportunity, though profitability gains will take time. Expansion of local manufacturing capacity is expected to follow initial import growth.