India is preparing to ease its strict import duty regime on cars from the European Union, with plans to reduce tariffs to about 40 per cent under a proposed free trade agreement, according to sources. Currently, duties on fully built imported cars can go as high as 110 per cent, making them unaffordable for most buyers.
The proposed tariff reduction reflects India’s willingness to compromise in order to conclude the long-pending India-EU free trade deal, which has been under negotiation for almost two decades. Officials suggest that the agreement is in its final stages and could be unveiled during a forthcoming bilateral summit.
Under the plan, lower tariffs would initially apply to a fixed quota of vehicles, mainly in the premium segment. Further reductions could follow gradually. European carmakers, which have struggled to gain a foothold in India due to steep taxes, are expected to see improved access to one of the world’s largest and fastest-growing automobile markets.
The Indian government is said to be cautious about protecting domestic manufacturers. As a result, electric vehicles may be excluded from immediate tariff cuts, giving local EV players time to expand capacity and investments.
India sells more than four million passenger vehicles annually, yet imports account for a negligible share. Any easing of duties could reshape the premium car segment, increase consumer choice and intensify competition.
Beyond automobiles, the proposed India-EU trade agreement is expected to cover multiple sectors, including services, investment and intellectual property. India is pushing for greater access for its labour-intensive exports, while the EU is seeking reduced tariffs and regulatory clarity.
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