NEW DELHI: A massive shift is coming to the Indian automotive landscape. In a move that could redefine the luxury car market, India is reportedly preparing to slash import duties on vehicles as part of a landmark Free Trade Agreement (FTA) with the European Union.
The Proposal According to high-level reports surfacing Monday, New Delhi has offered to reduce tariffs on imported cars from the current staggering rate of 110% down to just 40%. This significant concession is aimed at breaking the deadlock in the long-pending trade negotiations with the EU. Currently, India imposes one of the world’s highest tax walls on imported vehicles—110% on fully built units (CBUs) valued over $40,000. This has long been a point of contention for European giants like Germany, who have pushed for better market access.
Impact on Luxury Brands If finalized, this deal would be a game-changer for automakers like Mercedes-Benz, BMW, and Audi. While these companies assemble many cars locally to avoid taxes, their top-tier models (like the S-Class or electric flagships) are often imported and taxed heavily. A duty cut to 40% would drastically lower the showroom price of these ultra-luxury vehicles.
Protecting Local Industry However, the government is treading carefully to protect domestic players like Tata Motors and Mahindra. Sources indicate the tariff reduction might only apply to a specific quota of vehicles or be phased in over several years. This ensures that the Indian market isn’t suddenly flooded, giving local manufacturers time to adapt to the new competition. The deal is expected to be a major talking point in the next round of diplomatic talks.
