The European Commission and Australia have reached a comprehensive free trade agreement after years of negotiations, aiming to remove tariffs across most sectors and strengthen cooperation in electric vehicles, batteries and critical raw materials.
The deal will abolish more than 99% of tariffs on EU exports to Australia, while also reducing import duties on key raw materials. The European Commission estimates the agreement could save European companies around €1 billion annually in customs duties.
For the automotive sector, the agreement removes the existing 5% tariff on vehicle exports from the EU to Australia, covering all drivetrains including battery-electric vehicles. At the same time, EU tariffs of up to 4.5% on automotive parts from Australia will be eliminated, lowering costs for manufacturers sourcing components.
The agreement also introduces changes to Australia’s Luxury Car Tax (LCT), a long-standing barrier for European premium brands. The threshold for electric vehicles will be raised from 91,387 Australian dollars to 120,000 AUD, meaning many imported EVs will no longer be subject to the tax.
The European Commission said around 75% of EU-exported electric vehicles will benefit from the revised threshold, while the lower threshold will remain in place for combustion engine vehicles.
Hildegard Müller said the agreement would support European manufacturers. “In times of increasing isolationism and protectionism, this agreement sends a powerful signal for fair and rules-based trade,” she said, adding that it would “open up significant opportunities” for export-oriented carmakers.
According to the German Association of the Automotive Industry, Germany exported around 44,000 vehicles to Australia in 2025.
The agreement also targets supply chains for battery production by eliminating EU tariffs on Australian critical minerals, including lithium and aluminium. Duties of 5.5% on raw materials and 5.3% on lithium hydroxide will be removed, improving access for European battery manufacturers.
Australia is a major global supplier of key materials such as lithium and manganese, which are essential for electric vehicle batteries. The European Commission said the deal will strengthen the EU’s access to these resources as demand rises and dependence on imports remains high.