India plans to cut EU car import tariffs from 110% to 40% as trade deal nears: Report

India plans steep tariff cut on European cars, BMW and Volkswagen among gainers

• India to reduce EU car import tariffs from 110% to 40%
• Tariff cuts for cars over €15,000, excluding EVs, for 5 years
• India and EU may announce free trade pact, ending years of stalled negotiations

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India is preparing to significantly cut import tariffs on cars from the European Union as part of a long-awaited free trade agreement that could be announced as early as Tuesday, according to sources cited by Reuters.

Under the proposed deal, New Delhi plans to reduce peak import duties on EU-made cars to 40 per cent, down from current levels of up to 110 per cent, marking the most substantial opening yet of India’s heavily protected automobile market.

The initial tariff cut would apply to a limited number of fully built cars priced above 15,000 euros (around Rs 16.3 lakh). Over time, these duties are expected to be lowered further to as little as 10 per cent, easing access to the Indian market for European automakers such as Volkswagen, Mercedes-Benz, and BMW.

Sources said India has agreed to immediately lower duties on around 200,000 internal combustion engine vehicles annually, although the final quota could still change. Battery electric vehicles will be excluded from the duty reductions for the first five years to protect investments by domestic manufacturers, with similar cuts expected to apply to EVs later.

India and the EU are expected to announce the conclusion of negotiations for the comprehensive free trade pact, ending years of stalled talks. While the announcement would mark a major milestone, the agreement will still require finalisation and ratification by both sides.

India is the world’s third-largest car market after the United States and China, but remains among the most protected. Import duties on fully built cars currently range between 70 per cent and 110 per cent, a policy frequently criticised by global auto executives.

Lower import taxes would allow European carmakers to price imported models more competitively and test new vehicles in India before committing to further local manufacturing investments, sources said.

The proposed tariff cuts coincide with a four-day visit to India by European Commission President Ursula von der Leyen, who is in the country along with European Council President António Costa for Republic Day celebrations.

The leaders are scheduled to hold summit-level talks with Prime Minister Narendra Modi, with the free trade agreement expected to be announced alongside a strategic defence partnership and measures to ease mobility for Indian professionals in Europe. India’s commerce ministry and the European Commission declined to comment on the reported plans.