EU nudges India to cut tariffs on car imports: report

India is willing to bring down tariffs on cars from the European Union (EU) in a phased manner after the bloc sought to eliminate high import tariffs as part of ongoing negotiations over a long-pending free trade agreement (FTA), Reuters reported on Monday, citing people in the know.

Currently, India imposes import duties on automobiles that exceed 100%, which are among the highest in the world. While the Indian government is considering a phased reduction of these tariffs, local automakers have expressed a strong disagreement to sweeping changes, particularly in the electric vehicle (EV) segment.

People familiar with the matter told Reuters that the government is looking at a proposal to gradually reduce car import tariffs to 10%. However, domestic carmakers are lobbying for a minimum duty of 30%, saying that lower rates would jeopardize investments in local manufacturing and the nascent EV industry.

“Talks are ongoing with both the EU and the US. There’s growing momentum now, and India could consider deeper cuts, though the auto sector is lobbying hard to maintain higher rates,” a government personnel member told Reuters.

European automakers such as BMW, Mercedes-Benz, and Volkswagen will likely to benefit from reduced tariffs, and gain expanded market access in India. Tesla is also likely to be among the beneficiaries, with plans to export EVs from its Berlin plant to India as early as this year.

In previous negotiations, India proposed reducing tariffs on a limited number of petrol vehicles, starting with a 70% duty and eventually lowering it to 30%. However, the EU has maintained that this was insufficient and has been pushing for zero tariffs, particularly for cars that meet specific environmental or investment standards.

“The EU and India have different approaches and objectives in key areas, leading to varying levels of ambition,” said Olof Gill, spokesperson for the European Commission on trade.

To address these demands, India’s commerce ministry held a meeting last week with officials from the heavy industries ministry and representatives from the auto sector to communicate the EU’s position and India’s potential response.

Indian manufacturers including Tata Motors and Mahindra and Mahindra have opposed the inclusion of EVs in any tariff concessions. People familiar with the matter told Reuters that they have proposed maintaining current duties on EV imports until at least 2029, followed by a phased reduction to 30% on a limited volume of vehicles.

The EU’s request is part of larger trade talks with India under a proposed India-EU Free Trade Agreement. Both sides want to finish the deal by the end of this year.