India Set To Cut Car Import Duties From 110 Per Cent To 40 Per Cent As EU Free Trade Pact Nears Conclusion

India is preparing to sharply reduce import duties on cars from the European Union, marking one of the most significant openings of its tightly protected automobile market as New Delhi and Brussels move closer to sealing a long-awaited free trade agreement.

As per a Reuters report, the government plans to cut tariffs on a limited number of imported cars priced above €15,000 from as high as 110 per cent to 40 per cent in the first phase.

Over time, these duties could fall further to 10 per cent, easing market entry for European manufacturers including Volkswagen, Mercedes-Benz and BMW.

The proposed reduction would initially apply to around 200,000 combustion-engine vehicles annually.

Electric vehicles will be kept out of the concession window for the first five years, a move aimed at protecting domestic investments by firms such as Tata Motors and Mahindra & Mahindra. After that period, EVs are expected to follow a similar tariff-lowering path.

India and the EU are expected to announce the conclusion of negotiations for the free trade pact as early as Tuesday (27 January), after which the agreement will undergo legal finalisation and ratification.

The deal has already been described by negotiators as “the mother of all deals”, reflecting its scale and strategic importance.

If concluded, the agreement could significantly boost bilateral trade at a time when Indian exporters, particularly in textiles and jewellery, are facing pressure from steep US tariffs imposed since late August.

India’s car market, the world’s third-largest after the US and China, has long been a sticking point in talks due to high import duties that global manufacturers have repeatedly criticised.

European carmakers currently command less than four per cent of India’s 4.4-million-unit annual market, which is dominated by Suzuki Motor and domestic players Tata and Mahindra.

Lower tariffs would allow manufacturers to test demand with a wider range of imported models before committing to expanded local production.

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