India is set to slash car import tariffs from 110% to 40% for EU vehicles priced above €15,000, with a quota of 200,000 combustion-engine cars annually, ahead of a potential trade deal announcement on Tuesday.
India is preparing to sharply lower import taxes on European cars as it moves closer to sealing a long-awaited trade deal with the European Union. Under the plan, duties on premium vehicles would fall to 40%, from levels that currently go as high as 110%, according to sources familiar with the matter.
The government has offered an immediate tariff cut for up to 200,000 petrol and diesel cars a year, with rates eventually dropping to 10%. The move would mark India’s biggest step yet in opening its auto market and is likely to benefit brands such as Volkswagen, Mercedes-Benz and BMW.
Electric vehicles, however, will remain outside the agreement for the first five years, giving local manufacturers like Tata Motors and Mahindra & Mahindra time to strengthen their position. Officials have described the agreement as the “mother of all deals,” saying it would also help revive Indian textile and jewellery exports that have been hurt by U.S. tariffs.
Deal Finalisation Accelerates Market Access
After years of slow progress, trade talks finally moved forward after the Modi government offered key concessions. Tuesday’s announcement set the ratification process in motion and is expected to open the European Union market further to Indian exporters.
For European carmakers, the opportunity comes from a small base. They currently make up less than 4% of India’s 4.4 million-vehicle market, which is largely controlled by Maruti Suzuki, Tata Motors and Mahindra & Mahindra. Lower duties could give European brands room to price more competitively, letting them test imports before committing to larger investments in local production.
Strategic Protections for Domestic EVs
India has decided to keep battery electric vehicles outside the deal for five years, giving local companies more time to build capacity and justify recent investments. Officials added that some flexibility remains, with import quotas still open to last-minute changes.
The policy has drawn continued criticism from Tesla chief Elon Musk, who has long argued against India’s protectionist approach. Government officials, however, say the trade agreement would help blunt the impact of U.S. tariffs and deepen trade ties between the two sides.
Industry Boost Amid Global Shifts
Lower tariffs could change how European carmakers approach India. Cheaper duties would allow them to sharpen prices and bring in a wider range of models, not just high-end cars.
That shift could help mass-market players like Renault and Stellantis gain ground alongside luxury brands. With India now the world’s third-largest auto market, the opening carries clear strategic importance for European manufacturers looking to expand their global footprint.
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