India to cut EU car import tariffs as trade deal nears
India plans to sharply reduce tariffs on cars imported from the European Union, cutting duties to 40% from levels as high as 110%, sources said, marking the country’s most significant opening yet of its protected auto market as the two sides move closer to a free trade agreement that could be announced as early as Tuesday.
The government of Prime Minister Narendra Modi has agreed to immediately lower import taxes on a limited number of cars from the 27-member European Union with an import value above 15,000 euros ($17,739), according to two sources briefed on the negotiations, News.Az reports, citing Reuters.
The duty rate would be reduced further over time to 10%, the sources said.
The move would ease access to the Indian market for European automakers including Volkswagen, Mercedes-Benz and BMW. The sources requested anonymity because the talks are confidential and may still change. India’s commerce ministry and the European Commission declined to comment.
India and the EU are expected to announce the conclusion of long-running negotiations for the free trade pact on Tuesday, after which the agreement will be finalised and ratified. Officials have described the accord as “the mother of all deals.”
The pact could significantly expand bilateral trade and support Indian exports such as textiles and jewellery, sectors that have been hit by 50% U.S. tariffs since late August.
India is the world’s third-largest car market by sales, after the United States and China, but its auto sector has remained one of the most protected globally. New Delhi currently imposes tariffs of 70% to 110% on imported vehicles, a policy frequently criticised by industry executives, including Tesla chief Elon Musk.
Under the proposal, India would immediately slash duties to 40% on up to about 200,000 combustion-engine cars per year, one source said, describing it as the most aggressive liberalisation step taken so far. The quota could still be adjusted before a final announcement.
Battery electric vehicles would be excluded from the tariff cuts for the first five years in order to protect domestic investments by companies such as Mahindra & Mahindra and Tata Motors, the sources said. After that period, EVs would be subject to similar reductions.
Lower import duties are expected to benefit European carmakers including Volkswagen, Renault and Stellantis, as well as luxury brands Mercedes-Benz and BMW, which already manufacture vehicles locally but have struggled to expand due to high tariffs. Reduced taxes would allow companies to price imported models more competitively and test broader product ranges before committing to additional local production, one source said.
European automakers currently account for less than 4% of India’s annual car market of about 4.4 million vehicles, which is dominated by Japan’s Suzuki Motor and domestic players Mahindra and Tata, together controlling roughly two-thirds of sales. With the market projected to grow to 6 million vehicles a year by 2030, several companies are already preparing new investment plans.
By Nijat Babayev
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