Volkswagen, Audi React To India-EU FTA - Don't Hold Your Breath For A Price Drop!

If a viral social media video has convinced you that your favourite European car from brands like Mercedes-Benz, BMW, Audi, or Volkswagen will soon see massive price drops, then it is advisable to take a moment and get into the details for clarity. The rumours are based on the recent Free Trade Agreement (FTA) between India and the European Union. As more details come in and carmakers share their views on the FTA, it has now become clearer that while there is a possibility of some price restructuring for imported cars in the mid to long-term, the average car buyer should not hold their breath in the hope of getting a luxury car for the price of a mass-market model.

The reason behind an unlikely drop in popular European car prices has two sides

to it. First, luxury and premium carmakers such as Mercedes-Benz, BMW, Audi, Volkswagen and Skoda currently produce over 90 percent of their portfolio in India itself. This means that the car that you have on your bucket list is probably made or assembled in India and unlikely to benefit from any massive price benefit under the FTA. Secondly, exclusive or made-to-order products like AMG and M performance cars, or limited-run models such as the Golf GTI or Octavia RS, are the outliers here and are imported into the country as Completely Built-Up (CBU) cars. Which means that the brands could pass on the FTA benefit to customers in due time but any claim right now is completely speculative.

Volkswagen			Audi			Skoda
Made-in-India	Imported (CBU)		Made-in-India	Imported (CBU)		Made-in-India	Imported (CBU/CKD)
Taigun	Tiguan R-Line		A4	Q8		Kylaq	Octavia RS
Virtus	Tayron R-Line (Upcoming)		Q3	RS Q8 Performance		Kushaq	Kodiaq
	Golf GTI		Q7	A8L		Slavia
Majority Share	Limited Share		Majority Share	Limited Share		Majority Share	Limited Share

While popular European carmakers welcome the India-EU FTA, they are also making it clear that under the new tariffs, the exchange of technology and encouragement towards investments are the key highlights. This also includes the complete abolishment of import duty on automotive parts and components outlined to happen in the next 5 to 10 years. However, massive price drops on existing cars are not the focus of the FTA.

As Piyush Arora, MD & CEO of Skoda Auto Volkswagen India (SAVW) said in a statement, 'With our current lineup and offers, now is truly a great time to make an informed purchase without waiting for speculative changes'. Giving a similar perspective around price restructuring and implications of the FTA, Balbir Singh Dhillon, Brand Director, Audi India, said, 'This constructive approach to trade could support the broader automotive ecosystem, including innovation, supply-chain efficiency, and technology collaboration. That said, any implications for pricing & market can only be assessed once the final terms are available and carefully reviewed, including the timeframe of implementation. Until then, it would be premature to draw conclusions on specific commercial or product strategies.'

Also Read: Mercedes-Benz And BMW React To India-EU FTA - Immediate Price Change Unlikely!

Similar statements were echoed from other major European carmakers in India, such as Mercedes-Benz and BMW, confirming that while the India-EU FTA will lead to long-term improvement in the country's automotive ecosystem, the price drop on imported cars is unlikely to be immediate or lead to any direct benefits in terms of volumes or the mass-market buyer.

In a nutshell, while the tariff cut from 110 percent to 10 percent may improve pricing structures of expensive and fully imported cars, it is still unlikely to have a large effect in terms of sales. Moreover, the drop in tariff will be implemented in a phased manner and the timeline of implementation has not been specified under the FTA guidelines yet. Most importantly, the reduced tariffs are capped at 2.50 lakh cars for now. In the end, customers of super-exclusive imported cars like Lamborghinis, Bentleys or Maybachs and AMGs stand to be the winners eventually, meanwhile, we can expect prices for popular models such as the BMW 3-series or a Mercedes-Benz E-Class to remain unchanged.