India-New Zealand free trade agreement: Boosting car exports and auto parts market

India and New Zealand have signed a Free Trade Agreement (FTA) that removes tariffs on all Indian goods, including vehicles and auto parts. The deal, finalized after nine months of negotiations, eliminates duties of up to 10 percent that previously affected Indian car and parts exporters in New Zealand. This agreement arrives as New Zealand's automotive market undergoes significant changes.

Key Highlights

• India and New Zealand sign FTA eliminating up to 10 percent tariffs on Indian vehicles and parts
• Indian vehicle exports to New Zealand rose from USD 10 million in 2022 to USD 26 million in 2026
• Electric vehicles made up 16.5 percent of New Zealand's new registrations in March 2026
• New Zealand's ferrous scrap and wood log exports to India both doubled their share since 2022
• Maharashtra and Tamil Nadu identified as main Indian states to benefit from the agreement

Tariff Elimination and Export Growth

Indian vehicle exports to New Zealand have increased steadily in recent years. In the financial year 2022, India exported about USD 488 million worth of goods to New Zealand, with passenger cars accounting for approximately USD 10 million. By the end of February in financial year 2026, total exports had risen to USD 524 million. Vehicles now make up 5 percent of that basket, or around USD 26 million, according to Rubix Data Sciences.

With the removal of tariffs, Indian manufacturers will compete on equal terms with exporters from New Zealand's other FTA partners. This is expected to further boost Indian automotive exports to the country.

New Zealand Market Shifts

The New Zealand car market is rapidly changing. Fully electric vehicles (EVs) made up 16.5 percent of new registrations in March 2026, with 2,370 units sold that month. For the year to date, EVs account for 10.6 percent of new light vehicle sales, nearly double the 5.7 percent share in 2025. Plug-in hybrids and other electrified vehicles have maintained about 45 percent of monthly new car sales since late 2024.

Despite this growth, most of New Zealand's 4.4 million light vehicles still use combustion engines. EVs and plug-in hybrids together represent just over 3 percent of the fleet, indicating significant room for future growth and replacement.

Broader Trade and Supply Chain Effects

The FTA also benefits Indian manufacturers by improving access to raw materials. New Zealand's ferrous scrap exports to India have grown from 7 percent of India's import basket in FY2022 to 13 percent in FY2026. Wood logs have also increased from 6 percent to 13 percent over the same period. The agreement guarantees duty-free access to wooden logs, coking coal, and metal scrap, which are crucial for India's auto supply chain.

Maharashtra and Tamil Nadu are expected to benefit most from the deal. Maharashtra has a strong auto component industry, while Tamil Nadu is a major hub for automotive exports, textiles, and leather. Both states were highlighted as key beneficiaries in the government’s announcement.

Implementation and Industry Response

This FTA is India's seventh in three and a half years. It will take effect once both countries complete their domestic ratification processes. Mahindra Group CEO Anish Shah described the agreement as built on shared trust and concluded quickly. He noted that it creates new opportunities in farm equipment, mobility, technology, and hospitality.

Also Read: India Shifts EV Policy Focus from Incentives to Compliance and Structured Growth

CarBike 360 Says

The India-New Zealand Free Trade Agreement marks a pivotal moment for the automotive sector, granting duty-free access that slashes costs and boosts Indian car and auto parts exports to a high-value market. With New Zealand's tariffs eliminated, manufacturers like those in EV components stand to gain significantly, fostering jobs, innovation, and bilateral trade growth toward $5 billion. This strategic pact solidifies India's global auto prowess.