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India to Slash EU Car Import Duties to 40% in Historic Trade Deal

India is preparing to dramatically reduce import duties on cars from the European Union as part of a forthcoming free trade agreement. The peak tariff will fall to 40% from the current high of 110%, initially applying to a limited number of premium internal combustion engine vehicles. Electric vehicles are excluded from the immediate cuts for five years to protect domestic manufacturers. The deal, set to be announced soon, marks a major opening of India's protected auto market for European brands like BMW and Mercedes-Benz.

Key Points: India-EU Trade Deal: Car Import Duties Cut from 110% to 40%

  • Duties to drop from 110% to 40%
  • Applies to cars over €15,000 initially
  • EVs excluded for first 5 years
  • Deal expected to be announced imminently
2 min read

India plans major cut in import duties on EU cars as trade deal nears

India plans to cut EU car import duties from 110% to 40% in a new trade deal, opening its auto market for Volkswagen, Mercedes, and BMW.

"This would be the biggest opening so far of India's tightly protected automobile market."

New Delhi, Jan 26

India is preparing to sharply cut import duties on cars from the European Union as part of a long-pending free trade agreement, which could be announced as early as Tuesday, according to reports.

Under the proposed deal, India plans to bring down peak import tariffs on EU-made cars to 40 per cent from the current levels of up to 110 per cent.

This would be the biggest opening so far of India's tightly protected automobile market.

Initially, the lower duty will apply to a limited number of fully built cars priced above 15,000 euros, which is around Rs 16.3 lakh.

Over the years, these duties are expected to be reduced further, possibly to as low as 10 per cent.

This move will make it easier for European carmakers like Volkswagen, Mercedes-Benz and BMW to sell their vehicles in India.

Sources said India has agreed to immediately cut duties on around 2 lakh internal combustion engine cars every year, though the final number may still change.

Electric vehicles will not get these benefits in the first five years, as the government wants to protect investments made by domestic manufacturers. Similar duty cuts for EVs are expected at a later stage.

India and the European Union are likely to announce the conclusion of negotiations for the comprehensive free trade agreement, ending years of stalled talks.

While the announcement will be a major milestone, the deal will still need to be finalised and approved by both sides before it comes into force.

India is currently the world's third-largest car market after the US and China, but it remains one of the most protected.

Import duties on fully built cars range between 70 per cent and 110 per cent, a policy that global auto companies have often criticised.

Lower import taxes will allow European carmakers to price their imported models more competitively in India.

It will also help them test new vehicles in the Indian market before deciding on further local manufacturing investments, reports said.

The proposed tariff cuts come at a time when European Commission President Ursula von der Leyen is on a four-day visit to India.

The European leaders are expected to hold summit-level talks with Prime Minister Narendra Modi.

- IANS

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Reader Comments

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Priya S
Good move for consumers who want more choices. But cars above 15 lakhs? That's still for a very small section of India. What about reducing duties on more affordable models? The real growth is in the 5-10 lakh segment. Hope this deal benefits the common man too, not just the elite. 🤔
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Aman W
Finally! The 110% duty was ridiculous and only encouraged smuggling and grey market imports. A structured reduction to 40% is a welcome change. This will increase competition and hopefully improve after-sales service standards across the board. Jai Hind! 🇮🇳
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Sarah B
As an expat living in Delhi, this is excellent news. It was nearly impossible to justify importing a car from back home. This trade deal seems balanced – protecting EV investments for now while opening up the market. Smart negotiating by India.
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Karthik V
I have mixed feelings. Yes, competition is good. But will this lead to more "Made in India" or just more "Imported to India"? The clause about them testing vehicles here before local investment is key. We must ensure this deal brings technology and jobs, not just finished cars.
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Nisha Z
Great for car enthusiasts! 🚗 But what about the impact on our trade deficit with the EU? We need to see what concessions *they* are giving for our exports – textiles, agriculture, IT services. A deal is only good if it's a two-way street. Hope the full details are made public soon.

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