New Delhi will immediately cut import duty on luxury cars to 30% from as high as 110% under the India-EU FTA, an official said, opening the tightly controlled market to the likes of Mercedes-Benz to BMW and Volkswagen AG’s Audi.
While India has agreed to reduce import duty on cars priced more than €15,000 (~ ₹16.5 lakh) to 10% over time, details of how the cuts will be implemented were not disclosed publicly.
According to a senior government official, India has agreed to immediately cut import duty on 100,000 ICE cars annually split between three price categories:
- Cars with an import price of €15,000 to €35,000 will see duty reduced to 35%, with annual imports capped at 34,000 units.
- Cars priced €35,000 to €50,000 will be charged a 30% duty, with imports limited to 33,000 units a year.
- A further 33,000 cars priced more than €50,000 will also be subject to a reduced tariff of 30%.
The two highest price categories will see the largest tariff reductions. The cap for all three categories combined will be raised to 160,000 units over 10 years, said the official on the condition of anonymity as the India-EU FTA still requires legal vetting.
India-EU FTA
India and the European Union finalised a long-delayed deal on Tuesday that will cut tariffs on most goods and boost trade, at a time when governments worldwide are seeking to hedge against fickle U.S. policy and manage growing trade tensions.
India is the third-largest car market globally by sales after the United States and China. But its domestic auto industry has been among the world’s most protected, with the government levying tariffs of between 70% and 110% on imported cars.
PRICIEST EUROPEAN CARS BENEFIT FROM BIGGEST DUTY CUTS
India’s trade ministry did not immediately respond to a request for comment on the details of the agreement.
MORE INDIANS DEVELOPING A TASTE FOR LUXURY
At a time when a growing number of Indians are developing a taste for opulence – from expensive homes to watches and even bathroom fittings – luxury cars made up less than 1% of the 4.4 million passenger vehicles sold in the country last year.
While executives have said that lower tariffs are unlikely to translate into immediate price cuts, they said the reductions will allow them to bring more vehicles to the market.
Lower import taxes should also be a boost for other European automakers such as Volkswagen, Renault and Stellantis, which have said increased trade will also result in increased technology transfer and shared supply chains.
LOCAL EV MANUFACTURERS TO REMAIN PROTECTED FOR NOW
India will, meanwhile, also cut import duties to 30% to 35% on a total of 20,000 European-made electric vehicles, the official said, but only five years after the trade deal is implemented.
Those tariff cuts will only apply to EVs priced above 20,000 euros in order to protect domestic players like Tata Motors and Mahindra.
Similar to combustion engines, the duty on EVs will reduce to 10% over five years and the annual import quota will rise to 90,000 units, the official added.
