Daijiworld Media Network – New Delhi
New Delhi, Jan 25: In a major move to open up its automobile market, India is set to significantly slash import duties on cars from the European Union, lowering tariffs to 40 per cent from the current levels of up to 110 per cent, sources said. The decision comes as India and the EU move closer to finalising a long-awaited free trade agreement, which could be announced as early as Tuesday.
According to sources familiar with the negotiations, the Narendra Modi-led government has agreed to immediately reduce import duties on a limited number of EU-made cars priced above 15,000 euros. Over time, the tariff is expected to be further brought down to 10 per cent, easing market access for European automakers such as Volkswagen, Mercedes-Benz and BMW.
The sources, who spoke on condition of anonymity due to the confidential nature of the talks, said the agreement is being hailed as the “mother of all deals”. While India’s commerce ministry and the European Commission declined to comment, both sides are expected to formally announce the conclusion of negotiations soon, followed by ratification.
As part of the proposal, India may allow imports of around 2 lakh combustion-engine vehicles annually at the reduced duty rate. However, battery electric vehicles will remain excluded from the duty cuts for the first five years to safeguard domestic investments by companies such as Tata Motors and Mahindra & Mahindra. After this period, EVs are likely to be brought under a similar tariff structure.
India, the world’s third-largest car market after the US and China, has long maintained one of the most protected auto sectors globally. Imported vehicles currently attract duties ranging between 70 per cent and 110 per cent, a policy often criticised by global auto executives.
The tariff reduction is expected to benefit European manufacturers, including Volkswagen, Renault, Stellantis, Mercedes-Benz and BMW, many of whom already have a manufacturing presence in India but face challenges expanding due to high import costs. Lower duties will allow them to test the Indian market with a wider range of models before committing to further local production.
European automakers currently account for less than four per cent of India’s annual car sales of about 4.4 million units, a market dominated by Suzuki Motor, Tata Motors and Mahindra & Mahindra. With vehicle demand projected to rise to 6 million units annually by 2030, several global players are lining up fresh investments.
Industry watchers say the proposed trade pact could also boost Indian exports, particularly in sectors such as textiles and jewellery, which have faced pressure following steep US tariffs imposed since last August.