India Set to Slash Import Duties on EU Cars as Free Trade Deal Nears Conclusion

New Delhi - India is preparing to significantly reduce import duties on cars manufactured in the European Union as part of a long-pending free trade agreement, which could be announced as early as Tuesday, according to reports.

Under the proposed arrangement, India plans to cut peak import tariffs on EU-made cars to about 40 per cent, down from the current rates that go as high as 110 per cent. This would mark the most substantial opening of India’s heavily protected automobile market to date.

In the initial phase, the reduced duty structure will apply to a limited number of fully built vehicles priced above 15,000 euros (approximately Rs 16.3 lakh). Over time, these tariffs are expected to be lowered further, potentially to as little as 10 per cent.

The move is expected to benefit major European automakers such as Volkswagen, Mercedes-Benz and BMW, making it easier for them to sell imported vehicles in India.

Sources indicated that India has agreed to immediately reduce duties on around 200,000 internal combustion engine cars annually, though the final quota may still be revised. Electric vehicles, however, will be excluded from these concessions for the first five years, as the government seeks to safeguard investments made by domestic manufacturers. Similar tariff reductions for EVs are expected to be considered at a later stage.

India and the European Union are likely to formally announce the conclusion of negotiations on the comprehensive free trade agreement, bringing an end to years of stalled discussions. While such an announcement would be a major milestone, the agreement will still require finalisation and approval by both sides before implementation.

India is currently the world’s third-largest automobile market after the United States and China, but it remains among the most protected. Import duties on fully built cars presently range between 70 per cent and 110 per cent, a policy long criticised by global auto companies.

Lower import taxes would allow European carmakers to price their vehicles more competitively in India and help them test new models in the market before committing to further local manufacturing investments.

The proposed tariff cuts come as European Commission President Ursula von der Leyen is on a four-day visit to India, during which European leaders are expected to hold summit-level talks with Prime Minister Narendra Modi.

--IANS