Australian fleets can look forward to lower prices of European company cars, after Australia and the European Union negotiated a free trade agreement.

The arrangement will remove the 5% tariff currently levied on car, truck and motor vehicle parts exported from the EU. The European Commission forecasts that the deal will lead to a 52% increase in EU vehicle exports over the next decade.

Furthermore, Australia is increasing the price threshold at which it applies 33% luxury car tax on imported cars to AUD 120,000 (€73,500) for electric cars. This will exempt about 75% of EVs from luxury car tax.

Tariffs on EU exports of trucks will be gradually removed.

Mega deal

Ursula von der Leyen, President of the European Commission, described the free trade agreement as a ‘mega-deal,’ and said, “Europe is Australia’s third-largest trading partner and second-largest foreign investor. [And] beyond the quantity of our exchanges, it is the quality that matters. Our standards are aligned like no others.”

For Australia, 98% of the current value of its exports to the EU will now be duty free, with wine and agriculture set to be big winners.

Australia vehicle market

Asian and American manufacturers dominate vehicle sales in Australia, where pickups (utes) and SUVs lead the sales charts. Toyota is the number one importer, followed by Ford, and Mazda, with Chinese brands growing in strength.

2025 Top 10 brands and sales in Australia Toyota – 239,863 Ford – 94,399 Mazda – 91,923 Kia – 82,105 Hyundai – 77,208 Mitsubishi – 61,198 GWM – 52,809 BYD – 52,415 Isuzu Ute – 42,297 MG – 41,298

Source: RACV

The Ford Ranger was the best selling vehicle last year, followed by the Toyota RAV4 and Toyota Hilux. The best-selling EU-made car was the Volkswagen Amarok, which registered at 59th in last year’s new vehicle sales chart. Audi, BMW, Land Rover and Mercedes-Benz also had models among the top 100 best selling vehicles.

Battery-electric cars accounted for 8.7% of Australian new car sales in 2025, but exports of critical raw materials from Australia to the EU following the free trade agreement will support the supply chains of European OEMs. Australia is resource-rich in materials such as lithium, manganese, and cobalt required to make batteries for electric vehicles.

Negotiations between the EU and Australia for a free trade agreement started in 2018, and concluded in March 2026. The negotiated draft text of the agreement will be soon published, and will then have to be adopted by the European Council, before being signed by the EU and Australia. It will then need the consent of the European Parliament and ratification by Australia before entering into force.

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