India’s long-pending free trade agreement with the European Union is close to being announced, Reuters reported. This deal could bring significant relief for buyers of imported luxury cars. According to the report, the deal will see India sharply reduce import duties on cars from EU countries, a move that could make premium models from brands such as Mercedes-Benz, BMW and Volkswagen far more affordable over time.At present, India imposes import tariffs on fully built cars, with duties ranging from 70 percent to as high as 110 percent. Under the proposed India–EU FTA, these peak duties are expected to be brought down to 40 percent initially.
As per a Reuters report, India has proposed cutting duties to 40 percent for up to around 200,000 internal combustion engine vehicles imported annually from the EU. The final quota is still under discussion and could be revised before the agreement is formally signed. Initially, the lower duty is likely to apply only to fully built cars priced above 15,000 euros, which is roughly Rs 16.3 lakh.Over the longer term, the agreement could lead to even deeper cuts. However, the benefits will not extend to electric vehicles in the early years. As per the report, EVs will be excluded from the reduced duty structure for at least the first five years, as the government looks to safeguard investments made by domestic manufacturers in the electric mobility space. Similar concessions for electric cars are expected to be considered at a later stage.The timing of the announcement is also significant. The proposed tariff cuts come as European Commission President Ursula von der Leyen is on a four-day visit to India, during which summit-level talks with Prime Minister Narendra Modi are expected.
