India Intends To Lower EU Auto Tariffs By Up To 110% And To 40% From The Existing Level

India plans to reduce tariffs on cars imported from the European Union (EU) to 40 percent from the current level of up to 110 percent, sources familiar with the negotiations told Reuters today, ahead of the finalization of the free trade agreement, which would end almost two decades of negotiations between the Indian and European economies.

According to sources, the government of Indian Prime Minister Narendra Modi has agreed to immediately reduce customs duties on a limited number of cars imported from the EU, whose import prices exceed 15,000 euros, while they would be further reduced to 10 percent over time.

New Delhi has proposed dropping tariffs immediately to 40 percent on about 200,000 cars with internal combustion engines a year.

Electric vehicles would be exempt from tariff reductions in the first five years in order to protect domestic investments, while after that period, they would also be covered by similar measures.

India is the world’s third-largest car market by sales, after the US and China, but its automotive sector is among the most protected.

Current tariffs on car imports are between 70 and 110 percent, which has often been the subject of criticism from manufacturers. According to Reuters, this would facilitate access to the Indian market for European manufacturers such as Volkswagen, Mercedes, and BMW.

Lower tariffs could allow European manufacturers to sell imported models at lower prices and test the market before deciding to expand local production.

European brands currently have less than a four percent share of the Indian car market, which is dominated by Japan’s Suzuki and domestic manufacturers Mahindra and Tata.

• Also See: India Wants To Outlaw High-End Petrol And Diesel Vehicles