India is gearing up to significantly lower import duties on cars from the European Union under a forthcoming free trade agreement, potentially to be revealed as early as Tuesday. The proposed deal entails slashing peak import tariffs on EU-manufactured cars to 40%, down from the current levels reaching up to 110%. This move marks a substantial opening of India’s closely guarded automobile market.
Initially, the reduced duty will be applicable to a select group of fully assembled cars priced above 15,000 euros, approximately Rs 16.3 lakh. Over time, these tariffs are anticipated to decrease further, potentially dropping as low as 10%. This adjustment is poised to facilitate European automakers like Volkswagen, Mercedes-Benz, and BMW in marketing their vehicles in India more effortlessly.
Reports suggest that India has agreed to promptly decrease duties on roughly 200,000 internal combustion engine cars annually, although the final figure might still undergo alterations. Electric vehicles, however, will not benefit from these concessions in the initial five years, as the government aims to safeguard investments by local manufacturers. Similar duty reductions for EVs are anticipated at a later stage.
India and the European Union are expected to declare the conclusion of negotiations for the comprehensive free trade agreement, culminating years of stagnant discussions. Despite the significant announcement, the agreement necessitates finalization and approval from both sides before taking effect. India presently ranks as the world’s third-largest car market following the US and China, yet it remains heavily shielded.
Import duties on fully assembled cars in India range between 70% and 110%, a policy that has frequently drawn criticism from global automotive companies. Lowering import taxes will enable European car manufacturers to competitively price their imported models in the Indian market. Additionally, it will facilitate the evaluation of new vehicles in India before committing to further local manufacturing investments, as per reports.
The proposed tariff reductions coincide with the visit of European Commission President Ursula von der Leyen to India for a four-day trip. European leaders are anticipated to engage in summit-level discussions with Prime Minister Narendra Modi.
