India is set to significantly lower import duties on cars from the European Union as part of a long-awaited free trade agreement FTA, reported news agency Reuters quoting sources familiar with the negotiations. The move would mark the biggest opening yet of India’s tightly protected automobile market and could reshape competitive dynamics in the premium car segment.
Under the proposed deal, tariffs on cars imported from the 27-nation EU bloc will be slashed to 40% from the current levels of up to 110%, with further reductions planned over time. Reuters further said that duties could eventually be lowered to as little as 10%, offering European automakers far greater access to one of the world’s fastest-growing auto markets.
The agreement, which could be finalised as early as this week, is seen as a key step in strengthening trade ties between New Delhi and Brussels amid shifting global supply chains and geopolitical realignments.
Reuters in the report said that the initial tariff cut will apply to a limited quota of around 200,000 combustion-engine cars annually, with a minimum import price of over 15,000 euros. This structure is designed to primarily benefit premium European brands such as Volkswagen, Mercedes-Benz and BMW, which have long sought easier entry into the Indian market.
The proposed quota and pricing thresholds are still subject to last-minute changes, as negotiations remain confidential.
Notably, battery electric vehicles (EVs) will be excluded from import duty reductions for the first five years of the agreement. The decision reflects India’s intent to protect and nurture domestic investments in the nascent EV space, led by players such as Tata Motors and Mahindra & Mahindra.
After the initial five-year period, EVs are expected to be brought under a similar duty-reduction framework, aligning with India’s longer-term electrification roadmap.
