India may cut import duty on EU cars to 40% from up to 110% as trade deal talks near finish line: sources
India is reportedly preparing a major opening of its auto market by reducing import tariffs on a limited number of European cars to 40% from as high as 110%, as India and the EU close in on a free trade pact. Further phased cuts and EV carve-outs are also being discussed.
A potential breakthrough in India-EU trade negotiations
India is considering a sharp reduction in import duties on cars from the European Union as part of a free trade agreement that sources say could be finalised soon. The proposal would bring tariffs down to 40% from levels that currently go as high as 110%—one of the most significant signals yet of India’s willingness to open a heavily protected segment of its market.
As reported, the reduction would apply immediately to a limited number of cars imported from the 27-nation bloc, and would be tied to a price threshold. Further phased reductions—potentially toward 10% over time—are part of the broader structure being discussed, according to people briefed on the talks.
What it could mean for consumers and automakers
If implemented, lower import taxes could make certain European models more price-competitive in India. It could also allow manufacturers to test demand with a wider imported portfolio before committing to expanded local manufacturing, which typically requires long lead times and stable policy expectations.
The move is expected to benefit brands such as Volkswagen, Mercedes-Benz and BMW, among others, that either sell imported models or maintain local operations while still facing constraints from high tariffs on fully built units.
EVs, safeguards, and phased opening
One important caveat in the reported structure is the treatment of electric vehicles. Sources indicate EVs may be excluded from import duty reductions for an initial period (reported as five years), a safeguard aimed at protecting domestic investment and localisation plans in the emerging EV ecosystem.
Such carve-outs reflect the balancing act for negotiators: offering market access to the EU while preserving policy space for India’s domestic manufacturers and its industrial strategy. The final contours may still change as talks progress, including any quota and eligibility details.
- Proposed tariff cut: to 40% from as high as 110% for certain EU cars
- Further phased reductions could follow over time
- EV duty cuts reportedly delayed to protect domestic investment
For India’s broader economy, a clearer route to an India-EU trade deal could have effects beyond automobiles, shaping rules around standards, technology cooperation and supply-chain alignment. For the auto sector specifically, the biggest question will be how quickly any duty cuts translate into pricing changes, product launches, and manufacturing decisions.