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FTA Promises Lower Import Duties for European Cars
The India-Europe Free Trade Agreement (FTA) is set to bring more predictability for carmakers in India. Import duties on fully built European cars, which can currently reach 110%, will gradually fall to around 10% over time. This will be managed through an annual quota of 250,000 vehicles. For the first five years, 160,000 internal combustion engine (ICE) vehicles will see duty cuts. Electric vehicles (EVs) will qualify for lower tariffs starting in the fifth year, with 90,000 units initially. Early in-quota tariffs are expected near 30%, while tariffs outside this quota will also decrease over ten years. Kits for local assembly (CKD units) are not included in these duty concessions, encouraging local production. This plan aims to balance opening up imports with supporting India's EV industry growth.
SAVWIPL Targets 5% Market Share With Aggressive Plans
While the FTA could expand the car choices in India, current global uncertainties and a need for clearer FTA details are making some buyers hesitant about imported vehicles. Piyush Arora, Managing Director and CEO of Skoda Auto Volkswagen India (SAVWIPL), noted this caution but expects buying sentiment to improve as the FTA details become firm. SAVWIPL remains committed to a strong growth strategy. The company, which includes Audi, Bentley, Volkswagen, and Skoda, plans 18-19 new models or updates by 2026, covering both local production and imports. Volkswagen Passenger Cars India alone aims for at least four new product actions this year. The company's main goal is to reach 5% market share by 2030, up from its current level below 3%, by offering a range of ICE vehicles and new energy options. In 2025, SAVWIPL sold 117,000 vehicles domestically, a 36% rise from the previous year. The Skoda brand more than doubled sales to 70,665 units in 2025, a 107% increase, and the Volkswagen Virtus sedan held a leading 38% share in its segment.
Competition Heats Up; Mass Market Sheltered from Imports
The Indian car market, especially the premium sector, is becoming more competitive. In 2025, Skoda Volkswagen held 2.42% market share, up from 1.96% the year before, selling 108,277 units. This share is much smaller than market leaders Maruti Suzuki (39.91%), Mahindra (13.25%), and Tata Motors (12.68%). While the premium segment is smaller, it's also strong, with Mercedes-Benz, BMW, and Audi holding substantial shares. The FTA's duty cuts on European luxury cars, particularly for parts used in local assembly, should lower car prices in India. However, the main market for cars under Rs 20 lakh, which accounts for nearly 95% of sales, is largely protected from direct import competition due to price sensitivity. Electrification is a key focus for SAVWIPL's future. India's EV market is growing rapidly, making up about 5% of total sales, but faces issues like poor charging infrastructure and high EV prices. SAVWIPL plans to launch EVs before 2030, using hybrid and other technologies as stepping stones. The company is also looking into Compressed Natural Gas (CNG) options, a popular fuel in India's passenger car market. Exports, which make up about 30% of production, will continue to be important, with North Africa being a potential new market. SAVWIPL is also exploring popular segments like sub-4 metre SUVs.
Key Risks: Delayed EV Duties, Past Targets, and Fierce Competition
Despite the FTA's potential, SAVWIPL faces several risks. The gradual tariff cuts, especially the five-year wait for EV import duty benefits, protect India's developing EV industry. This means European premium EVs will remain costly to import until at least 2031. SAVWIPL has also missed market share goals before, failing to reach its 5% target by 2025. With its current share around 2.5%, it must significantly outperform rivals, including domestic leaders like Mahindra and Tata Motors, who are strong, especially in SUVs. The company's ambitious plan for 18-19 new models in 2026 demands perfect execution to gain ground against established competitors. Global issues like geopolitical tensions and fluctuating exchange rates could also affect car demand and investment.
SAVWIPL Eyes Strong Growth in Expanding Indian Market
SAVWIPL is focused on expanding its product range and market presence. The company expects to grow faster than the overall Indian passenger vehicle market, which is projected to grow in the mid-single digits in FY27. Achieving its 5% market share goal by 2030 relies on steady product introductions, aiming for a new launch or update each quarter. Introducing EVs and other alternative fuel vehicles by the end of the decade is central to this plan, alongside its current ICE models and export activities. India's automotive market is forecast to expand at an annual rate of 7.3% from 2025 to 2030, reaching over 8.3 million vehicles by 2030, offering a solid foundation for SAVWIPL's expansion.