Companies such as Volkswagen, Mercedes-Benz, UK-based Jaguar Land Rover (JLR), Renault, and BMW already assemble imported kits and sell cars and SUVs in India at a low tariff of 16.5%, while the proposed trade pact reportedly aims to bring down tariffs from 110% to 40%.
Regardless of the tariff benefits from the trade pact, European automakers see local manufacturing as key to demonstrate their commitment to India’s growing luxury car market, where demand is poised to accelerate with rising prosperity.
“Having a local manufacturing or assembly presence is a critical demonstration of long-term commitment. It gives customers, suppliers, and dealer partners confidence that a carmaker is invested in India beyond opportunistic imports, and it aligns with the government’s broader objectives of localisation, employment and supply-chain development,” Vinay Piparsania, founder of Millenstrat Advisory and Research, an auto-focused consultancy, said. “Most European automakers have spent years building local ecosystems, and as market access expands, they are more likely to deepen these investments rather than retreat from them.”
Germany’s Mercedes-Benz announced this month that it will begin local assembly of its luxury sports utility vehicle (SUV) Maybach GLS in India, making it the only market outside the US to produce the vehicle locally. It was joined by peer Volkswagen Cars, which announced that it has rolled out the locally-assembled Tayron R-Line from its plant in Chhattrapati Sambhaji Nagar just a year after its global launch.
The two carmakers will be joined by French Renault which unveiled its new Duster on Monday which will be locally produced. The company has termed India one of its five strategic growth hubs as it began its product offensive with Duster SUV which was its best seller in the last decade before it was discontinued.
Jaguar Land Rover, which manufactures some of its cars in Slovakia, is also set to roll out its first vehicle from its parent Tata Motors’ new plant in Ranipet, Tamil Nadu, in a month.
The European carmakers are doubling down on their plans to increase local assembly and expand manufacturing presence at a time when the India and European Union are on the cusp of signing a free trade agreement (FTA).
Reuters reported, citing sources, that India plans to cut duties on cars imported from the EU to 40%, from as high as 110% currently. Also, India has agreed to reduce the tax on a limited number of cars from the 27-nation EU with an import price of more than 15,000 euros, which will be further reduced to 10% in due course.
Germany’s BMW plans to launch six new models this year, with most already localised at its Chennai plant, which has an annual capacity to produce up to 50,000 units.
Hardeep Singh Brar, chief executive officer (CEO) at BMW, said that the company already relies less on imports of fully built cars, but the FTA can help broaden the product range.
“If customs duties on completely built units are reduced, it would help expand the luxury car market in India. While CBUs (completely built-up units) currently account for about 5% of our sales, such a framework would allow us to broaden our product portfolio, introduce globally popular models and test new offerings,” he said on the potential impact of the upcoming EU-India FTA.
Piyush Arora, head of Volkswagen Group India, said the company’s strategy is to develop and produce cars that can sell in large numbers domestically, rather than relying on imports.
“This gives us an opportunity to develop products locally and for that I would still believe that irrespective of how the trade agreement evolves, our strategy of local for local would still remain our focus for volume growth,” Arora told Mint.
Volkswagen Group has a plant capacity to produce around 200,000 cars in India annually, serving both its Skoda and Volkswagen brands.
This strategy of betting on local production was reiterated by Mercedes Benz India leadership as they unveiled the firm’s plan for 2026. With more than 90% of cars being sold in India already localised through assembly operations at its plant in Chakan, Mercedes is adding more models to its local assembly lineup to reduce prices for customers.
“We are localizing the Maybach in India. India will be the first market outside of the US to locally produce a GLS Maybach. And this benefit we pass on to customers. So, currently the GLS Maybach is at ₹3.37 crore, that car comes down to ₹2.75 crore,” Santosh Iyer, managing director and CEO at Mercedes Benz India, said. Mercedes locally assembles its cars at its Chakan facility with an annual capacity of over 20,000 units.
The commitments from the two carmakers come about eight months after Jaguar Land Rover’s management reiterated that it is looking to expand the lineup of locally-assembled vehicles after adding Range Rover and Range Rover Sport to the Chakan facility, where it can assemble 10,000 vehicles annually.
Tata Motors Passenger Vehicles is constructing its new facility in Ranipet, with a total capacity of 250,000 vehicles per annum, which will be shared with JLR. The first car from this plant was scheduled to be rolled out by this month.
“Most of our models are locally assembled in India at the Pune plant,” JLR’s chief financial officer Richard Molyneux said in May, referring to its Range Rover series during a post-earnings call for the January to March period.
“For Defender, plans are in process to assemble the cars locally,” he had said then. “We want to tap demand from ultra-high-net-worth individuals in the upcoming years and grow presence in the Indian market.”
Renault India took full ownership of its 480,000-vehicle-per-year plant near Chennai from Nissan in March last year, as part of its revival strategy in the Indian market. While both Renault and Nissan will continue producing cars at the facility, the French automaker has assumed greater control of manufacturing operations to bolster its competitiveness in India.
As part of its product offensive to take market share, Renault will unveil its brand new Duster model, which will be built at its plant near Chennai.
“Today, we are one chef in the kitchen. Everything goes into one person or one power centre, and from there, it gets distributed and then cascades back. So, the responsibility and responsiveness will be terrifically good, which wasn’t the case earlier,” Renault India managing director Venkatram Mamillapalle had told Mint in an interview last year.
