India Set to Slash Car Import Tariffs to 40% in Major EU Trade Deal: Report

India Set to Slash Car Import Tariffs to 40% in Major EU Trade Deal: Report

New Delhi / Brussels: India is preparing to significantly cut import tariffs on cars from the European Union, marking one of the biggest openings of its tightly protected automobile market. According to sources familiar with the negotiations, the move is part of a landmark free trade agreement (FTA) that India and the EU are expected to announce as early as Tuesday.

If confirmed, the deal could reshape India’s auto sector, boost European carmakers, and deepen trade ties between the two economic powers.

India–EU Free Trade Talks Near Historic Conclusion

After years of negotiations, India and the European Union are set to formally conclude talks on what officials are already calling “the mother of all trade deals.”

Key highlights of the expected announcement:

• India and the EU are likely to declare the end of trade negotiations on Tuesday

• Final legal details and ratification will follow

• The pact aims to significantly expand bilateral trade and investment

The agreement comes at a critical time for India, as several of its export sectors—such as textiles and jewellery—have faced pressure due to steep US tariffs imposed since late August.

Car Import Tariffs to Be Slashed From 110% to 40%

One of the most eye-catching elements of the deal is India’s plan to cut import duties on European cars.

What the tariff cuts will look like:

• Current tariffs: Between 70% and 110% on imported cars

• New proposed tariff: 40% initially

• Long-term goal: Gradual reduction to 10% over time

The lower tariff will apply to a limited number of imported cars priced above €15,000 (£13,000 approx.), according to two sources briefed on the talks.

This move represents India’s most aggressive step yet to open its auto sector to foreign competition.

Quota System to Control Initial Imports

To manage the impact on domestic manufacturers, India plans to introduce a quota system.

Proposed quota details:

• Around 200,000 petrol and diesel cars per year

• Quota size may still change before final approval

• Applies only to vehicles imported from the EU

Officials involved in the talks said the approach allows India to balance market access with protection for local manufacturers.

Electric Vehicles Excluded for First Five Years

Despite the tariff cuts for traditional vehicles, electric vehicles (EVs) will not benefit immediately.

EV tariff policy under the deal:

• No import duty reduction for EVs for five years

• Designed to protect Indian EV investments

• Domestic players like Tata Motors and Mahindra & Mahindra will benefit

After the five-year period, EVs are expected to follow a similar duty-reduction path as petrol and diesel cars.

Big Boost for European Carmakers

The tariff reduction is expected to be a major win for European car manufacturers, many of whom have struggled to grow in India due to high import taxes.

Carmakers likely to benefit:

• Volkswagen

• Renault

• Stellantis

• Mercedes-Benz

• BMW

Although some of these companies already manufacture vehicles locally, high tariffs have limited their ability to test the market with imported models.

Lower duties will allow brands to:

• Offer imported cars at more competitive prices

• Introduce a wider range of models

• Assess demand before investing in local production

Indian Car Market: Huge Potential, Tight Competition

India is currently the world’s third-largest car market, after the United States and China.

Market snapshot:

• Annual sales: 4.4 million vehicles

• Expected to reach 6 million vehicles by 2030

• European brands hold less than 4% market share

• Market dominated by:

  • Maruti Suzuki

  • Tata Motors

  • Mahindra & Mahindra

Together, Indian and Japanese manufacturers control nearly two-thirds of the market.

New Investments Already in Motion

With the Indian car market set for rapid growth, European companies are already planning their next moves.

Recent developments:

• Renault is preparing a fresh comeback strategy in India

• Volkswagen Group is finalising new investments through its Skoda brand

• Carmakers see India as a key growth market amid rising competition in Europe from Chinese brands

Government Silence as Deal Nears Final Stage

Sources declined to be named, citing the confidential nature of the talks and the possibility of last-minute changes. Both India’s Commerce Ministry and the European Commission have so far declined to comment.

However, expectations are high that the agreement will be officially announced within days.

Why This Deal Matters

If implemented, the India–EU trade pact could:

• Transform India’s protected auto industry

• Lower prices for imported European cars

• Attract fresh foreign investment

• Strengthen India’s position in global trade

For consumers, it could mean greater choice and more competitive pricing. For automakers, it opens the door to one of the world’s fastest-growing car markets.

References

• Reuters – Exclusive report on India-EU trade negotiations and auto tariff cuts

• Statements from sources briefed on the India-EU free trade talks

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