In a move that could reshape India’s auto industry landscape, the government is considering a phased reduction in import duties on vehicles from the European Union (EU), according to a new report from Reuters sourcing people familiar with the ongoing trade negotiations. The discussions form part of a broader trade deal that both India and the EU are aiming to conclude by the end of 2025.
Lower Car Import Tariffs?
Currently, imported vehicles in India attract a tariff of over 100%, one of the highest globally. Under the emerging proposal, India is reportedly willing to gradually lower this duty to as low as 10% for cars brought in from Europe, marking a significant shift in policy. Industry insiders reveal that the domestic auto sector is lobbying for a more cautious approach — suggesting a minimum 30% tariff on imports, and no immediate changes to duties on electric vehicles (EVs) until at least 2029.
The potential opening up of India’s car market is expected to favor global giants like Volkswagen, Mercedes-Benz, BMW, and even Tesla, which plans to begin imports later this year, possibly from its German manufacturing facility. However, such tariff cuts have raised concerns among Indian automakers such as Tata Motors and Mahindra & Mahindra, who fear that cheaper imports could impact investments made in domestic manufacturing and electric mobility.
The report reveals that India’s commerce ministry, which is leading the negotiations, recently discussed the tariff reduction proposals with officials from the heavy industries ministry and representatives from the domestic auto industry. While the European Commission acknowledged differences in ambition between the two sides, no formal comments have been made on the specifics of the tariff discussions.
Indian Carmakers Brace
For Indian carmakers, maintaining higher import duties has been essential to shielding local production and sustaining investments, especially as they ramp up efforts in EVs. Auto industry associations are reportedly pushing for a compromise that would allow gradual tariff reductions but still provide protection to domestic players during the crucial transition period.
With pressure mounting following similar requests from the United States, India’s balancing act between encouraging foreign investment and protecting homegrown industries will be critical in determining the outcome of these trade talks.
