India Plans Significant Reduction in Import Tariffs on EU Vehicles

[Policy Adjustment] India intends to lower the maximum import tariff on vehicles from the European Union from 110% to 40%, with a phased reduction further down to 10%.

Core Development: First Substantive Easing of High Tariff Barriers

The Indian government has agreed, under the framework of the India-EU Free Trade Agreement, to immediately apply a 40% tariff on a limited quota of imported vehicles priced above EUR 15,000 and originating from the 27 EU member states. This rate will be gradually reduced to 10% in the future. The initial annual quota is approximately 200,000 units, primarily covering internal combustion engine vehicles, while negotiations for fully electric models have been deferred by five years.

Strategic Rationale: Selective Opening to Balance Domestic Industry

This concession does not represent full market liberalization. Instead, it employs a price threshold, vehicle-type restrictions, and a quota mechanism to safeguard the domestic automotive supply chain. Currently, India imposes import tariffs of 70%–110% on vehicles—one of the highest globally—a policy long criticized by companies such as Tesla.

Industry Impact: European Luxury Brands Gain Market Access Opportunity

Although the 40% tariff remains high, it now makes pricing more viable in India for brands like Mercedes-Benz, BMW, and Volkswagen, potentially reshaping the competitive landscape in the country’s premium vehicle segment.