India is considering slashing import tariffs on European-made vehicles, including electric models, as part of ongoing negotiations for a free trade agreement (FTA) with the European Union, according to a government official and two industry sources, in a move that could reshape the country’s tightly protected auto sector.
The discussions include a proposal to reduce customs duties on imported EU cars from over 100% to as low as 10%, Reuters has learned. The tariff cuts would likely be implemented in phases to mitigate potential disruptions to domestic carmakers such as Maruti Suzuki, Tata Motors and Mahindra & Mahindra, who have made significant investments in local manufacturing.
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“We stand at a moment in history where India is well poised to convert the current situation into an opportunity,” Commerce Minister Piyush Goyal said at the India Global Forum in Mumbai on Monday. “We have an opportunity of a lifetime,” he added, highlighting India’s aim to become a preferred trade partner for Western economies amid shifting global supply chains.
Initial reductions may apply only to imported vehicles with a minimum cost, insurance and freight (CIF) value between $25,000 and $35,000, the sources said. The move would primarily benefit European luxury brands such as Mercedes-Benz, Audi, BMW and Porsche, while protecting India’s domestic producers from competition in the mass-market segment. U.S. automaker Tesla could also benefit by importing its Model Y.
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The development follows India’s recent indication that it may lower tariffs on U.S.-built vehicles as part of broader trade discussions aimed at easing tensions with Washington, its largest export market. India currently imposes import duties of up to 110% on electric vehicles, among the highest globally.
Senior officials from India’s Ministry of Commerce and Industry met with the Ministry of Heavy Industries and automotive executives to review the EU’s trade proposals, sources told Reuters. While local automakers have historically resisted lowering tariffs, the government appears increasingly open to the idea, viewing it as a potential lever to secure broader strategic agreements and leverage Western nations’ economic pivot away from China.
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In February, European Commission President Ursula von der Leyen visited India and met with Prime Minister Narendra Modi. Both leaders reaffirmed their intention to finalize the FTA by year-end.
India’s high tariffs have significantly inflated the prices of imported vehicles. For example, the Porsche Taycan starts at €102,600 in Germany but retails for approximately 16.98 million rupees (around €177,500) in India — a price difference of about 73%.
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If implemented, the tariff reduction would mark a notable shift in India’s trade policy, reflecting its broader ambition to position itself as a key player in global supply chains and an attractive partner for Western economies, Reuters reporting shows.