The European Union is asking India to remove tariffs on car imports as part of a trade deal that has been in talks for years, and sources say Prime Minister Narendra Modi’s government is ready to improve its offer to finalise the agreement.
India is open to reducing tariffs from over 100% to 10% in stages, according to a Reuters report quoting two industry sources and a government official, even though local carmakers want to keep tariffs at least at 30% and avoid changes to electric vehicle (EV) import duties for four years to protect their businesses.
This follows a similar request from US President Donald Trump’s administration a few weeks ago, which also asked India to eliminate car import duties, including on EVs, putting more pressure on India’s car market, which sells 4 million units yearly and has high trade barriers.
If tariffs are cut, European companies like Volkswagen, Mercedes-Benz, and BMW would gain better access to India, and Tesla, planning to sell imported EVs in India this year, possibly from its Berlin factory, could also benefit.
One industry source said, “EU has come back asking for a better deal and India wants to make a better offer.” India’s commerce ministry discussed the EU’s demands and India’s position with officials from the heavy industries ministry and auto industry representatives last week.
The European Commission did not give details but said in March, “For many of the key areas, the EU and India have different approaches, objectives … This translates, in some cases, in different levels of ambition,” according to trade spokesperson Olof Gill.
India’s carmakers, including Tata Motors and Mahindra & Mahindra, worry that lower tariffs would hurt their investments by making imported cars cheaper. They suggest cutting tariffs on a limited number of petrol cars to 70% from over 100% right away, then reducing them to 30% over time, and keeping EV tariffs unchanged until 2029 before lowering them to 30% on limited imports.
India and the EU have been working on this trade deal for years and agreed in February to finish it by the end of 2025 to lessen the impact of tariffs. Last week, European Council President António Costa wrote on X that it was time to “decisively advance in negotiations with India.”
The first industry source said, “If the EU is now feeling pressure to strike a deal with India we need to see how we can capitalise on that. It’s all about leverage.”
