200,000 Cars, 40% Duty: India-EU Pact Dubbed ‘Mother of All Deals’
India is preparing its biggest market opening yet by cutting tariffs on cars imported from the European Union, reducing duties from as high as 110% to 40%. Prime Minister Narendra Modi’s government has agreed to immediately lower taxes on select vehicles priced above €15,000 ($17,739), with plans to gradually reduce them further to 10%. The move is part of a broader free trade agreement expected to be announced Tuesday, aimed at easing entry for European automakers such as Volkswagen, Mercedes-Benz, and BMW.
Dubbed the “mother of all deals,” the India-EU pact is set to expand bilateral trade beyond automobiles, boosting Indian exports of textiles and jewellery that have faced steep U.S. tariffs. India, the world’s third-largest car market after the U.S. and China, has long maintained some of the highest import duties globally, drawing criticism from industry leaders including Tesla’s Elon Musk. Under the new proposal, New Delhi will allow up to 200,000 combustion-engine cars annually at reduced tariffs, while electric vehicles will remain excluded for five years to protect domestic investments by Mahindra & Mahindra and Tata Motors.
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Lower import taxes are expected to benefit European carmakers struggling to expand in India’s highly protected market, where Suzuki and local brands dominate with two-thirds of sales. Currently, European firms hold less than 4% of India’s 4.4-million-unit annual car market, but with demand projected to reach 6 million units by 2030, companies like Renault and Volkswagen are already planning new investments. The tariff cuts will allow foreign automakers to test the market with a wider portfolio at competitive prices before committing to larger-scale local manufacturing.
