India and the European Union are in the final stages of a free trade agreement (FTA). Under the proposed deal, tariffs on EU cars imported to India could drop from 110% to 40%, a massive reduction of up to 70%.

Key Points of the Deal

• Applies to vehicles imported from all 27 EU countries.

• Targeted at cars priced over €15,000 (~₹1.63 million).

• This will make European luxury and premium cars like Volkswagen, Mercedes-Benz, and BMW much more affordable in India.

Gradual Reduction Plans

• The 40% tariff rate is temporary.

• Over time, tariffs could be reduced further to 10%, opening India more to European carmakers.

EVs Are Exempt Initially

• To protect domestic EV makers like Tata Motors and Mahindra & Mahindra, battery electric vehicles won’t benefit from tariff cuts for the first 5 years.

• After 5 years, similar reductions may apply to EVs.

Impact

• European manufacturers get a stronger entry point into India.

• Consumers may see lower prices for imported EU cars over the next few years.

• Domestic EV sector remains shielded temporarily to encourage local investments.