India may cut EU car import tariffs to 40% from as high as 110% as trade pact talks near finish line: sources
India is considering a significant reduction in import tariffs on cars from the European Union—down to 40% from as high as 110%—as negotiations for a free trade agreement move closer to a conclusion, according to sources. The proposal, which would initially apply to a limited number of higher-priced vehicles, is being watched closely by global automakers and India’s domestic car industry.
A big potential shift in one of India’s most protected markets
India is planning to slash import tariffs on cars imported from the European Union to 40% from as high as 110%, sources familiar with the discussions told Reuters. The move would represent one of the most meaningful openings of India’s large passenger vehicle market in recent years, especially for European manufacturers that have long argued India’s tariff wall limits meaningful competition and consumer choice.
The reported plan is being linked to the advanced stage of India–EU free trade agreement negotiations. The idea, sources said, is that tariff cuts would begin with a limited number of vehicles, rather than a sudden, across-the-board liberalisation. That sequencing would allow India to test market impact while keeping some safeguards for local manufacturing.
How the phased tariff structure is expected to work
According to the report, the immediate tariff cut would apply to a limited number of cars with an import price above 15,000 euros. After the initial reduction to 40%, the duty could fall further over time—eventually down to 10%—depending on the final trade pact design and agreed timelines.
There is also an electric-vehicle angle. Sources indicated that import tariff reductions for EVs could be delayed for several years to avoid undercutting domestic investment plans and to give local manufacturers more time to scale up supply chains, localisation and charging ecosystem readiness.
Winners, risks and the domestic industry question
European automakers—from mass-market groups to premium brands—stand to gain quicker access to India’s buyers, especially if lower duties make fully built imports more price-competitive. At the same time, India’s domestic auto industry has historically pushed for caution, arguing that steep tariff cuts could harm local value chains and discourage manufacturing investment.
For policymakers, the balancing act is delicate: improve consumer access and strengthen trade ties with the EU, while still defending India’s broader “Make in India” goals in a sector that supports large employment and supplier networks.
Why this matters beyond cars
Automobiles are often treated as a bellwether for broader trade negotiations because they combine high tariffs, strong domestic lobbies and strategic industrial policy. If India and the EU can land a workable compromise on car duties and rules of origin, it could unlock progress across other chapters such as standards, digital trade, and investment protections.