India Cuts Car Import Tariffs to 40% Under EU Trade Deal: What It Means for Buyers and Automakers

India to Slash Car Tariffs to 40% in EU Trade Deal Move

India is poised to make a significant cut in import tariffs on cars imported from the European Union under a long-awaited free trade agreement, Reuters reported. Sources familiar with the talks say New Delhi has agreed to cut duties from the current high range of 70%–110% down to 40% immediately for a defined number of cars priced above €15,000 (around $17,700). The tariff level could fall further to 10% over time as part of the pact.

The proposed move is seen as the largest opening yet of India’s traditionally protected automobile market, which has long imposed some of the world’s highest levies on imported vehicles. European carmakers such as Volkswagen, Mercedes-Benz and BMW stand to benefit from the tariff reduction, as it could make their vehicles more affordable and competitive in India’s rapidly growing auto sector.

Currently, European automakers hold less than 4% of India’s annual 4.4-million car market, dominated by domestic brands like Suzuki as well as Mahindra and Tata Motors. Critics of high tariffs, including global industry leaders, have argued that lower duties could boost consumer choice and broaden competition.

Battery electric vehicles (EVs) are excluded from the initial tariff cuts for five years to protect local EV investment, but will be subject to duty reductions thereafter.

The free trade agreement, described by officials as a potential “mother of all deals,” could be formally announced as early as Tuesday, marking a historic milestone in India-EU trade ties.