India could become a key hub for the manufacture and export of Mercedes vehicles, but only if it's able to reach a free trade agreement (FTA) with the European Union, the automaker has said.

The south Asian nation has been engaged in sporadic negotiations with Brussels over a possible trade deal since 2007. Talks were suspended in 2013 due to lack of progress - partly resulting from disagreements over the EU wanting greater access to Indian markets for its cars - but resumed earlier this year.

It's now hoped that an agreement could be reached by the end of 2023.

Martin Schwenk, Mercedes' country head for India, said a trade deal that puts the country in a strong position, or gives it an advantage over other markets, would "definitely help" to make it a key export destination for the car manufacturer.

"To produce one car out of India for all markets of the world could be a strategy. But if we cannot, for example, export to the EU without penalties then we will not be able to compete against our factory in Hungary," he told Reuters.

Mercedes recently launched the EQS 580, its first locally built electric vehicle (EV) in India. Mr Schwenk said the company has plans to electrify its portfolio and become a fully-fledged EV manufacturer in India within the next eight to ten years.

Speaking after the resumption of FTA negotiations earlier this year, EU trade commissioner Valdis Dombrovskis said the bloc views its partnership with India as one of the most important relationships for the coming decade.

Indian commerce minister Piyush Goyal said the establishment of closer ties with Brussels could prove to be a "defining moment for world trade in the 21st century".