India to Cut Car Tariffs to 40% in EU Trade Deal

• India will immediately slash tariffs to 40% for approximately 200,000 imported combustion-engine cars annually priced over 15,000 euros, eventually lowering to 10%, benefiting European automakers like Volkswagen, Mercedes-Benz, BMW, and Renault
• Battery electric vehicles will see no tariff reductions for five years to protect domestic investments by Mahindra and Tata Motors in India's nascent EV sector
• European automakers currently hold less than 4% of India's market, which is dominated by Suzuki and local brands with two-thirds share, but the market is projected to grow to 6 million units annually by 2030

Summary: India to Cut Car Tariffs to 40% in EU Trade Deal

India and the European Union are set to announce completion of trade negotiations on Tuesday for a comprehensive free trade agreement, dubbed "the mother of all deals." The centerpiece includes India slashing automotive import tariffs from current levels of 70-110% to 40% immediately, with further reductions to 10% over time.

Key Details:

• Initial tariff cuts apply to approximately 200,000 combustion-engine vehicles annually priced above €15,000 ($17,739)
• Electric vehicles are excluded from tariff reductions for the first five years to protect domestic manufacturers like Mahindra & Mahindra and Tata Motors
• After five years, EVs will receive similar duty cuts

Market Context:

India is the world's third-largest car market by sales, behind the U.S. and China, with expectations to reach 6 million units annually by 2030. Currently, European automakers hold less than 4% market share, while Suzuki and domestic brands Mahindra and Tata control two-thirds of the market.

Primary Beneficiaries:

The tariff reductions will benefit European manufacturers including Volkswagen, Renault, Stellantis, Mercedes-Benz, and BMW, allowing them to test broader product portfolios at competitive prices before committing to expanded local manufacturing.

Broader Trade Implications:

The agreement will expand bilateral trade and potentially boost Indian exports of textiles and jewelry, which have been impacted by 50% U.S. tariffs since late August. The move represents India's most aggressive automotive sector liberalization to date, addressing longstanding criticism from industry executives including Tesla's Elon Musk.