Mercedes-Benz, BMW Dream Cars To See Massive Price Drops In India - Here's Why

It's official, the landmark Free Trade Agreement (FTA) between the European Union and India has been struck and it is set to make luxury European cars a lot more affordable than before. Under the new FTA,

India will gradually shave off the high import tax duty of 110 percent to as low as 10 percent in the coming time. Moreover, import duty on car parts is expected to be fully abolished in the next 5 to 10 years, which means that maintaining European cars in India will not be an expensive affair in the future. Currently, India has several premium and luxury segment car brands from Europe operating in the domestic market, such as Mercedes-Benz, BMW, Volkswagen, Porsche, Renault and several others. The new FTA is set to make purchasing high-end cars more accessible in the country and here's what you should expect in the coming months and years.

The FTA statement says, 'Tariffs on cars are gradually going down from 110 percent to as low as 10 percent, while they will be fully abolished for car parts after five to ten years.' This means that the prices of European dream cars will see an immediate effect in the country. However, the benefit of the lower import duty will be initially limited to 2.50 lakh imported cars. Moreover, reports suggest that the lower import tax will not apply to electric vehicle models from Europe, to protect the interests of domestic players such as Tata Motors and Mahindra & Mahindra. It is also possible that the import duty cut from 110 percent to 10 percent takes place in a phased manner by first implementing a 40 percent duty, which gradually reduces to just 10 percent.

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What Does This Mean For Car Buyers In India?

While prestigious brands like Mercedes-Benz, BMW and Volkswagen already offer Made-in-India cars to compete in the market, the more exclusive Completely Built-Up (CBU) cars from each brand's high-end and performance departments would now cost a lot less. For example, the Volkswagen Tiguan R-Line (CBU), which currently retails at Rs 45.73 lakh ex-showroom, could see a price drop of up to Rs 15 lakh, assuming a revised tax rate of 40 percent instead of 110 percent.

Similarly, a high-end imported vehicle such as the Mercedes-AMG GT Coupe roadster, which costs Rs 3.05 crore ex-showroom, could see a massive price drop. Assuming an import duty of 40 percent instead of 110 percent, it would soon cost approximately Rs 2.03 crore ex-showroom. These are considerable price drop projections on European cars, both under and over the Rs 1 crore mark. While competition will certainly rise for domestic carmakers, the Indian car buyer will now have a wider set of cars to choose from between Made-in-India and imported models.