New Delhi: India is poised to significantly lower import duties on passenger vehicles from the European Union as part of a sweeping free trade agreement expected to be unveiled soon, according to sources familiar with the negotiations. The move would mark the most substantial opening yet of India’s tightly guarded automobile sector.
Under the proposed framework, tariffs on cars imported from the 27-nation bloc would be reduced to 40 percent from the current levels that range between 70 and 110 percent. Over time, the levy could be brought down further to as low as 10 percent, easing market access for European manufacturers including Volkswagen, Mercedes-Benz, BMW, Renault and Stellantis.
Officials briefed on the talks said the immediate reduction would apply to a limited number of vehicles priced above 15,000 euros, with an annual quota reportedly under discussion. While the final contours of the agreement are still being refined, the announcement of the broader trade pact is expected as early as Tuesday.
Dubbed by negotiators as the “mother of all deals,” the agreement is anticipated to boost trade flows between India and the EU, potentially unlocking fresh opportunities for Indian exports such as textiles, gems and jewellery — sectors that have faced setbacks in key markets in recent months.
India’s automobile industry, one of the most protected in the world, has long drawn criticism from global manufacturers over steep import taxes. The proposed reduction represents a notable policy shift, aimed at encouraging competition, broadening consumer choice and attracting foreign investment.
However, battery electric vehicles will remain outside the scope of the duty cuts for the initial five years, a step intended to safeguard domestic investments in the emerging EV segment. After that period, electric models are expected to follow a similar phased reduction.
Currently, European carmakers account for less than four percent of India’s annual market of about 4.4 million vehicles, which is dominated by Japanese and domestic brands. Analysts believe that lower tariffs could help foreign manufacturers expand their footprint by allowing them to introduce a wider range of models at competitive prices before committing to larger-scale local production.
With India’s vehicle market projected to reach nearly six million units annually by the end of the decade, industry players are already preparing for fresh investments. Renault is reworking its India strategy, while Volkswagen Group is advancing new expansion plans through its Skoda brand, signaling growing confidence in the country’s long-term growth potential.
If finalised, the tariff overhaul could reshape India’s automotive landscape, making it more globally integrated while offering consumers greater choice and competitive pricing.
