Europe’s efforts at selling cars into Australia have been boosted by a free-trade agreement that slashes import tariffs to zero. Photo: James D. Morgan/Getty Images.
Getty Images
Europe’s automakers will be among the biggest winners in the European Union’s new free-trade agreement with Australia, helping them to stand their ground against a rising tide of Asian SUVs and light pickup trucks.
The eradication of Australia’s existing 5% import duty on vehicles moving from Europe will help both luxury brands like BMW, Audi, Porsche and Mercedes, and the makers of the light-commercial that dominate the Australian auto market.
European brands made up less than 10% of the Australia’s 1,209,808-strong, new-vehicle market last year, according to the Federal Chamber of Automotive Industry’s VFACTS.
The move will allow European brands to either lower their prices or bump up their equipment levels, servicing arrangements, warranties or customer support levels.
While the deal has been agreed to, it awaits ratification by both the Australian and European parliaments, delaying its implementation until next year at the earliest.
The biggest beneficiaries look set to be the premium brands that are Europe’s strongest players in the market, as the volume brands have been crushed by competition from Asia and by the market’s move to light-commercial, dual-cab pickups.
The Asian brands that dominate the Australian market have benefited from tariff-free importation for years.
The landscape has changed significantly in Australia, which has been a melting pot for global auto sales for decades. Since local manufacturing closed down, it has seen a huge rise in SUV and light-commercial pickup sales, with SUVs now accounting for 60% of the market and light commercials another 22.6%. Cars made up just 13% of the market in 2025.
This is reflected in the sales charts, which were led by the Ford Ranger in 2025, followed by the Toyota RAV4, the Toyota HiLux and the Ford Everest, with the Toyota Prado rounding out the top five.
Europe’s New Deal
Besides tariff elimination, there are other advantages for the Europeans that will help in several areas, not least in EVs.
Where China is starting with EVs at the bottom end of the market and working its way up, the Europeans have tried to go the other way, only to run into a 33% levy on luxury imported EVs. This has been lifted to €72,000 from the previous €55,000, allowing the thicker end of the premium brands to sell more EVs.
There will also be an acceleration of certification processes via the recognition of EU type approvals.
Europe’s Australian Story
Once a top-10 brand in Australia, Mercedes-Benz is one of the European carmakers with most to gain from the free-trade agreement. Photo: Alexander Koerner/Getty Images.
Getty Images
The free-trade move, signed on March 24, 2026, was welcomed by the European ACEA lobby group and the VDA, which represents the German manufacturers. German automakers have been fighting a losing battle, as their market share slipped from nearly 13% before Covid to 9% last year.
Europe rode high in Australia before the Covid pandemic, with Mercedes-Benz even claiming 10th spot in the outright sales table, but that was before China arrived en masse.
The highest-ranked European nation in sales is still Germany, which sits fifth behind Japan, Thailand, China and South Korea, but its 54,905 sales in Australia are dwarfed by Japan’s 358,981.
Of those, move, signed on March 24, 2026, was welcomed by the European ACEA lobby group and the VDA, which represents the German manufacturers, who have been fighting a losing battle as their market share slipped from nearly 13% before Covid to 9% last year.
The strongest European brand in cars is BMW, which claimed 5.1% of the 2025 market, followed by Mercedes-Benz (3.8%), Volkswagen (3.2%), Audi (2.6%) and BMW’s small car brand, Mini (2.1%).
While Volkswagen is by far the biggest brand of the Europeans in their domestic market, its sales dropped from around 40,000 in 2022 to less than 29,000 last year.
Stellantis has a barely perceptible presence in Australia, with the strongest of the brands being Jeep, which sold less than 2000 vehicles last year, and Peugeot. None of its represented brands made up more than 0.3% of the market.
US Vehicle Imports
The strong-selling X5 SUV has helped make BMW the biggest automotive exporter from the US. Photo: Sjoerd van der Wal/Getty Images.
Getty Images
Australia eliminated duties on vehicles from the US in 2012, though the current US administration’s decision to impose a 10% baseline tariff on goods from Australia, in breach of its existing free-trade agreement, has sparked domestic calls for a rethink. US-made new vehicles make up a small percentage of the Australian car market.
Ford’s Ranger sales have driven it into second place outright, behind Toyota, with the top-selling vehicle (and with the Everest at number four), but after that… Not much.
GM, once the darling of the local market with its now-discontinued Holden brand, sold just 4113 Chevrolets there last year and only 342 GMCs, while RAM sold 3271 vehicles.
So how did the US become the sixth- biggest automotive exporter to Australia?
The answer is… BMW. Its Spartanburg, South Carolina, plant supplied the X3, X4, X5, X6, X7 and XM SUVs to Australia in great numbers (more than all the US brands combined), and remains the biggest US automotive exporter by volume.