India-EU FTA to open new opportunities for auto component

India and the European Union are on the brink of finalizing a landmark Free Trade Agreement (FTA) that promises to reshape trade, investment, and innovation between the two regions. Union Minister of Commerce and Industry, Shri Piyush Goyal, recently highlighted the immense potential of this partnership during the 65th Annual Session of the Automotive Component Manufacturers Association (ACMA). With negotiations progressing at an unprecedented pace, this agreement is set to open new doors for businesses, especially in the automotive component sector.

A Balanced Partnership for Mutual Growth

The India-EU FTA is being crafted with sincerity and commitment, ensuring fairness and balance for both sides. Shri Goyal emphasized that such agreements require a degree of give-and-take to achieve mutual benefits. The ongoing discussions are moving in a positive direction, unlocking opportunities for trade, investment, technology transfer, and deeper economic engagement.

EU Commissioner Maroš Šefčovič echoed this sentiment, describing the negotiations as some of the most intensive and constructive ever held between the two partners. Both sides are striving to finalize the agreement by the end of the year, aiming for a win-win package that balances the interests of producers, exporters, and consumers.

Opportunities for the Auto Component Sector

The automotive component sector stands to gain significantly from the India-EU FTA. Shri Goyal expressed confidence that the provisions being crafted will be attractive and full of potential for businesses to grow, collaborate, and innovate. The agreement is expected to encourage joint ventures, technology partnerships, and collaborative innovation between Indian and European manufacturers.

India’s cost competitiveness in design, development, and R&D, combined with its skilled talent pool, makes it an increasingly attractive hub for global automotive companies. These partnerships will not only enhance productivity and reduce costs but also create jobs for Indian youth and position India as a leading center for high-quality automotive component manufacturing.

GST Reforms: A Boost for the Auto Industry

In addition to the FTA, recent GST reforms announced under the leadership of Prime Minister Narendra Modi have provided a significant boost to the auto industry. GST rates for the sector have been reduced from 28% to 18%, while tractors now attract a GST rate of just 5%. These reforms are expected to make spare parts more affordable, strengthen formalization, generate jobs, and expand demand across the value chain.

Shri Goyal described these reforms as the biggest since Independence, benefiting every Indian citizen. He stressed that the auto industry, as a torchbearer of the Make in India program, must aim higher, strengthen supply chains, and contribute significantly to jobs, exports, and high-quality manufacturing.

A Vision for the Future

The India-EU FTA represents a comprehensive economic partnership with strategic elements. Shri Goyal noted that India will benefit from Europe’s technology and innovation, while the EU will gain from India’s growth story, scale, and resilience. With aspirations to increase vehicle penetration from 34 cars per thousand people to significantly higher levels, the auto component industry is poised for global expansion.

As India marks 10 years of the Make in India initiative, this is an opportune time to build resilience, strengthen supply chains, and contribute to the nation’s growth story. Shri Goyal’s message was clear: challenges must not deter progress. With confidence, resilience, and collective effort, India will continue to grow stronger.

Conclusion

The India-EU Free Trade Agreement is more than just a trade deal—it’s a transformative partnership that will drive innovation, collaboration, and growth across industries. For the automotive component sector, it’s a golden opportunity to integrate with global value chains, enhance competitiveness, and lead the way in high-quality manufacturing. Combined with recent GST reforms, India is well-positioned to become a global hub for the auto industry.

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Source: Ministry of Commerce & Industry

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