Source Reuter
India is preparing to sharply reduce import duties on passenger vehicles as part of an ongoing free trade agreement (FTA) negotiation with the European Union, according to sources familiar with the discussions. The proposed move would see tariffs on imported cars slashed to around 40%, a significant reduction from current levels that can exceed 100%.
The tariff cut is being discussed as a key concession aimed at unlocking broader progress in the long-pending India–EU trade deal, which has gained momentum amid shifting global trade dynamics. The European Union has been pressing India to open up its automobile market, arguing that lower duties would boost trade, investment, and consumer choice.
Sources said the reduction would likely be implemented in phases and could be linked to conditions such as minimum price thresholds, engine capacity limits, or commitments on local manufacturing. This is intended to balance market access for European carmakers while protecting India’s domestic auto industry, which employs millions and is seen as strategically important.
European automakers, particularly premium brands, stand to benefit the most from the move, as high tariffs have long limited their competitiveness in the Indian market. At the same time, Indian authorities are seeking greater access for domestic goods and services in the EU, including pharmaceuticals, textiles, and IT services, as part of a broader trade-off.
While the proposal has triggered concerns among domestic manufacturers, government officials have indicated that safeguards will be built into the final agreement to ensure a gradual transition. Industry consultations are expected to continue before any final decision is announced.
Negotiators from both sides are aiming to conclude the trade deal within the next year, though officials caution that several sensitive issues remain unresolved. If finalized, the agreement would mark one of India’s most ambitious trade liberalisation steps in the automobile sector to date.
