stock market Image Credit source: ChatGPT

Shares of India's top car manufacturing companies like Mahindra & Mahindra (M&M), Maruti Suzuki India, Tata Motors and Hyundai fell up to 5% on Tuesday. This was due to fears that the India-EU FTA, which is going to be signed later in the day, could reduce taxes on cars coming from Europe. Shares of Mahindra & Mahindra fell as much as 5.1% to their lowest level since August 2025, leading to the biggest decline in the Nifty Auto index, which fell 2.2%. Hyundai Motor India shares fell 4.5%, while Maruti Suzuki India shares fell 3% and Tata Motors Passenger Vehicles lost 2% in value.

According to Reuters report, India is preparing to reduce the tax on import of cars from the European Union from 110% to 40%, as both the sides are very close to a free trade agreement, which can be finalized on Tuesday itself. The government has agreed to immediately reduce taxes on a limited number of cars priced above 15,000 euros ($17,739), the report said. European car companies like Volkswagen, Renault and Stellantis as well as luxury brands Mercedes-Benz and BMW will benefit from the lower import tax. Indian companies have been opposing such tax cuts for a long time. He says that this will make the vehicles coming from outside more cheap and competitive, which will affect manufacturing and investment in the country.

European companies market

At present, the share of European car companies in India's car market of 4.4 million units annually is less than 4%. This market is dominated by Japan's Suzuki Motor as well as domestic brands Mahindra and Tata, whose total share is about two-thirds. Analysts at Emkay Global say that if the India-EU Free Trade Agreement remains the same as the India-UK FTA, then the change in duty will have little or no impact on Indian passenger vehicle (PV) companies. The reason for this is that CBU i.e. completely built imported vehicles are generally limited to super luxury models priced between Rs 1 crore to Rs 1.5 crore. Premium carmakers like BMW, Mercedes and Audi already assemble more than 70% of their vehicles in India here.

MK Global said that the possible reduction in import duty on motorcycles from India to the EU by about 8% will be a positive news for big two-wheeler exporters like Bajaj Auto (KTM and Triumph) and TVS Motor (BMW and Norton). The reason for this is that in Europe, VAT is also imposed on the price of the bike and taxes depending on the country, due to which the total cost increases further.