India Reduces Tariff on Imported Cars from the E.U to 40%; Car Market Expected to Grow

 India has decided to slash the tariff on 200,000 combustion-engine cars a year imported from the E.U to 40%, as per a Reuters exclusive. This will be lowered further to 10% in the future. The Narendra Modi government has given the green light to tariff reductions on selected imported cars from the E.U with an import price of more than 15,000 euros ($17,739). 

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The Battery EVs are currently not included in the deal for the first five years of their implementation. However, later, the EVs will also be subject to the renewed tax duties. This is to protect investments in this nascent high-growth sector from the domestic automakers of India, including Mahindra & Mahindra, and Tata Motors. 

Positive Impact on the Indian Carmarket

Reuters mentioned that lower import taxes will allow the carmakers in India to sell the imported cars at a lower price. The E.U’s carmakers like Volkswagen, Renault, Stellantis, Mercedes-Benz, and BMW have been making and distributing cars locally in India. Reportedly, their growth was stifled and slow due to the high tariffs of India on the car trade. 

India’s car market is the world’s third-largest in terms of sales. Its 4.4-million units a year is dominated by Japanese Suzuki Motor and the homegrown companies like Mahindra & Mahindra, and Tata Motors. The E.U automakers have only 4% share. 

But, with the decrease in tax duties, the E.U automakers will be able to manufacture and sell more cars in Indian localities. 

The carmarket of India is also expected to grow to 6.6-million units a year by 2030, as many companies are going to invest in India, as per Reuters. Renault is returning to the Indian carmarket through its brand Skoda

Other Benefits

The deal is also aimed at opening up the Indian car market for the E.U automakers like Volkswagen, Mercedes-Benz, and BMW. It is also projected that the improvement in the car market will help improve the bilateral trade of goods like textiles and jewelry. The trade of these goods is suffering under the impact of 50% U.S. tariff.