New Delhi:
India plans to cut tariffs on cars imported from the European Union to 40% from as high as 110%, sources said, marking the biggest opening of the country’s protected auto market as the two sides near a free trade agreement that could be announced as early as Tuesday.
Prime Minister Narendra Modi’s government has agreed to immediately reduce the tax on a limited number of cars from the 27-nation bloc with an import price above 15,000 euros ($17,739), two sources familiar with the talks told Reuters.
The tariff will eventually be lowered to 10%, easing access for European automakers such as Volkswagen, Mercedes-Benz, and BMW.
The sources requested anonymity due to the confidential nature of the negotiations. India’s commerce ministry and the European Commission declined to comment.
Pact Dubbed ‘Mother of All Deals’
India and the EU are expected to announce the conclusion of long-running negotiations for the free trade pact on Tuesday. Details will then be finalised and ratified. The agreement, described as “the mother of all deals,” could expand bilateral trade and boost Indian exports of goods such as textiles and jewellery, which have faced 50% U.S. tariffs since late August.
India is the world’s third-largest car market by sales, after the U.S. and China, but its domestic auto industry has traditionally been highly protected. Currently, tariffs on imported cars range from 70% to 110%, a point often criticised by executives, including Tesla CEO Elon Musk.
New Delhi has proposed reducing import duties to 40% immediately for about 200,000 combustion-engine cars a year—the most aggressive move yet to open the sector. Battery electric vehicles will initially be excluded from duty cuts for five years to protect domestic players like Mahindra & Mahindra and Tata Motors; after five years, EVs will follow similar reductions.
Market Dominated by Suzuki and Domestic Makers
Lower import taxes are expected to benefit European automakers such as Volkswagen, Renault, Stellantis, and luxury brands Mercedes-Benz and BMW, which already manufacture cars locally but have struggled to expand due to high tariffs. Reduced duties will allow imported cars to be sold at more competitive prices, letting companies test the market before expanding local production.
European brands currently hold less than a 4% share of India’s 4.4 million-unit annual car market, dominated by Japan’s Suzuki and domestic brands Mahindra and Tata, which together control two-thirds of sales.
With India’s market projected to grow to six million units annually by 2030, several companies are planning new investments. Renault is staging a comeback with a new strategy to grow outside Europe, where Chinese automakers are gaining ground, while Volkswagen Group is finalising its next phase of investment in India through its Skoda brand. (Agencies)
