India–EU trade talks: Report says India may cut car import tariffs to 40% under proposed pact
A report citing sources said India is considering sharply lowering import tariffs on some EU-made cars as part of a potential free-trade deal, signalling a major opening for European automakers in one of the world’s biggest auto markets.
India and the European Union appear to be edging closer to a trade agreement with potentially far-reaching implications for the auto sector. A Reuters report, carried by Hindustan Times on 25 January 2026, said India plans to cut import tariffs on cars brought in from the EU to 40%, from rates that can be as high as 110%.
According to the report, the immediate cut would apply to a limited number of cars from the 27-nation bloc, and only to vehicles priced above a specified threshold (over 15,000 euros). The tariff, the sources said, would then fall further over time—down to 10%—marking a phased approach rather than a sudden, across-the-board opening.
If implemented, the move would likely improve market access for European brands that sell premium vehicles and have long sought lower duties in India. It would also be closely watched by Indian manufacturers and suppliers, for whom tariffs have historically functioned as a protective barrier in a market that is highly price-sensitive yet growing rapidly.
The report framed the tariff plan as one of the biggest openings yet in India’s car market in the context of free-trade talks. The proposal also suggests negotiators are aiming for a balance: allowing select premium imports earlier while offering local industry time to adjust before broader reductions take effect.
What to watch next
- Whether negotiators formally confirm the tariff structure and the volume cap for eligible imports.
- How EV-related timelines are handled, as governments often seek to protect domestic investment while planning gradual market access.
- What concessions—if any—are agreed in other sensitive sectors in exchange for tariff cuts on cars.
The direction of travel is clear: both sides appear to be pushing toward a deal, with automobiles emerging as a high-visibility test of how far India is willing to liberalise a historically protected segment while keeping policy space for domestic manufacturing.