The Society of Indian Automobile Manufacturers (SIAM), the apex body representing India’s major vehicle and engine makers, has sounded a strong warning about the potential risks posed by the impending Free Trade Agreement (FTA) between India and the European Union. With negotiations in their final phase and both sides targeting a conclusion by March 2026, industry leaders fear that Chinese electric vehicle (EV) manufacturers could exploit loopholes in the pact to indirectly access the Indian market at significantly reduced tariffs, threatening the hard-earned progress of domestic players.
The Core Concern: Rules of Origin and Circumvention
The primary worry centers on rules of origin — the criteria that determine whether a product qualifies for preferential tariff treatment under the FTA. Without stringent enforcement, Chinese companies could assemble or partially manufacture EVs in EU member states (such as Hungary or Poland, where firms like BYD have established operations) using predominantly Chinese components, batteries, and technology. These vehicles would then be exported to India claiming EU origin, benefiting from lower or zero duties and undercutting locally produced EVs.China already dominates the global EV supply chain, controlling around 70% of battery cell production and 85% of battery components. A backdoor entry through Europe could allow subsidized Chinese EVs — already holding substantial market share in the EU — to replicate that dominance in India, where the EV segment is still nascent but growing rapidly.
SIAM has urged the government to incorporate robust safeguards, including:
- A minimum 55% value originating from the EU (with strict verification of battery cells, semiconductors, and software).
- Denial of preferential access to vehicles with more than 40% Chinese content, regardless of assembly location.
- Restrictions on low-cost EVs, such as high price thresholds, volume caps, and limits to high-end models only.
India’s EV Momentum at StakeIndia’s EV registrations have surged, crossing one million units in the first half of fiscal 2026, driven by heavy investments from players like Tata Motors and Mahindra in localizing battery packs, motors, and other components. These efforts, backed by government incentives and policies, have attracted billions in investments and created thousands of jobs.
A sudden influx of low-cost, subsidized imports could force domestic manufacturers to slash prices, erode margins, and slow the build-up of a self-reliant EV ecosystem. Industry executives emphasize that while the FTA offers significant benefits — such as reduced duties on exports to Europe for components and finished vehicles — protecting the domestic industry is non-negotiable at this critical juncture.
Current Status of Negotiations
Recent high-level talks, including meetings between Commerce and Industry Minister Piyush Goyal and EU Commissioner Maros Šefčovič in Brussels (January 8-9, 2026), have shown steady progress on key chapters like market access for goods, rules of origin, and services. Both sides have directed officials to resolve pending issues and expedite the process toward a fair, balanced agreement.
