New Delhi
India is preparing to sharply reduce import duties on cars from the European Union as part of a long-pending free trade agreement, according to reports.
The announcement could come as early as Tuesday, signalling a breakthrough in negotiations that have remained stalled for years.
Under the proposed agreement, India plans to bring down peak import tariffs on EU-made cars to 40% from the current levels of up to 110 per cent. If implemented, this would represent the biggest opening so far of India’s tightly protected automobile market, which has long been shielded by some of the world’s highest import duties.
Initially, the lower duty structure will apply only to a limited number of fully built cars priced above 15,000 euros, or roughly Rs 16.3 lakh. Sources said that India has agreed to immediately cut duties on around 2 lakh internal combustion engine vehicles each year, though the final quota may still be revised during formal approval.
Over time, these tariffs are expected to be reduced further, potentially to as low as 10 per cent. Such a move would significantly improve market access for European automakers and reshape competition in India’s premium and luxury car segments.
The proposed cuts will make it easier for European manufacturers such as Volkswagen, Mercedes-Benz, and BMW to sell imported vehicles in India at more competitive prices. Lower import taxes will also allow these companies to test new models in the Indian market before committing to additional local manufacturing investments.
Electric vehicles, however, will not benefit from the reduced tariffs during the first five years of the agreement. The government is keen to protect investments made by domestic EV manufacturers, though similar duty cuts for electric cars are expected to be considered at a later stage.
India and the EU are likely to announce the conclusion of negotiations for the comprehensive free trade agreement, marking the end of years of on-and-off talks. While the announcement would be a significant milestone, the deal will still need to be finalised and approved by both sides before it can come into force.