India to Cut Tariffs on European Cars to 40% ahead of EU Trade Deal

India plans to slash import tariffs on cars from the European Union to 40% from the current 110%, marking the most significant opening of its highly protected auto market to date, according to sources familiar with the matter.

The move comes as New Delhi and Brussels edge closer to finalizing a long-anticipated free trade agreement (FTA), which could be announced as early as Tuesday.

Two sources told Reuters that the government of Prime Minister Narendra Modi has approved an immediate tariff reduction on a limited number of European vehicles, specifically those priced above €15,000 (about $17,739). The decision is expected to ease access for European automakers seeking a stronger foothold in the Indian market.

Over time, tariffs on cars imported from the EU’s 27 member states are expected to fall further to 10%, significantly improving market entry conditions for major manufacturers such as Volkswagen, Mercedes-Benz, and BMW.

India and the European Union are expected to announce the conclusion of negotiations on their long-running trade talks on Tuesday, after which both sides will finalize technical details and seek formal ratification of what officials have described as a landmark agreement.

The proposed deal could substantially expand bilateral trade and boost Indian exports, particularly in sectors such as textiles and jewelry, which have been hit by 50% U.S. tariffs imposed since late August.

India is the world’s third-largest car market by sales, after the United States and China. However, its domestic auto industry remains one of the most heavily protected globally. Current import duties range between 70% and 110%, a policy that has drawn repeated criticism from global automakers, including Tesla CEO Elon Musk.