KATHMANDU: India is planning a sharp cut in car import tariffs under a proposed free trade agreement with the European Union, according to Reuters.
The Indian government has agreed to immediately reduce duties on a limited number of EU-built cars priced above €15,000. Import tariffs would fall to 40 percent from current levels that go as high as 110 percent.
Over time, duties could be reduced further to 10 percent. This would improve market access for European automakers such as Volkswagen, Mercedes-Benz, and BMW.
Sources told Reuters the agreement could be announced as early as Tuesday. India’s commerce ministry and the European Commission declined to comment.
Officials have described the pact as the “mother of all deals.” It would end years of negotiations on a comprehensive trade agreement. Final approval and ratification would still be required.
The deal is expected to support Indian exports, including textiles and jewellery. These sectors have faced higher U.S. tariffs since late August.
India is the world’s third-largest car market after the U.S. and China. It currently imposes some of the highest vehicle import duties globally. These tariffs have drawn repeated criticism from global automakers.
Under the proposal, India would cut duties to 40 percent for around 200,000 internal combustion engine cars per year. The final quota may still change.
Battery electric vehicles would be excluded from the tariff cuts for the first five years. The move is aimed at protecting domestic EV investments by Tata Motors and Mahindra & Mahindra. EVs are expected to follow a similar duty reduction path after five years.
Lower tariffs would benefit European brands such as Volkswagen, Renault, Stellantis, Mercedes-Benz, and BMW. Many already assemble vehicles in India but face limits due to high import costs.
Reduced duties would allow companies to price imported models more competitively. It would also help them test new products before expanding local manufacturing.
European brands currently hold less than 4 percent of India’s annual car market of 4.4 million units. The market is dominated by Suzuki Motor, Tata Motors, and Mahindra.
India’s car market is projected to reach 6 million units annually by 2030. Several global automakers are preparing new investments. Reuters reported that Renault is revising its India strategy, while Volkswagen Group is planning its next phase through Skoda.
