Mercedes, BMW cars may become cheaper in India:Report claims tariffs on cars imported from Europe may be cut by up to 40%; announcement likely in the Free Trade Agreement tomorrow

The Indian government is preparing to sharply reduce import tariffs on cars coming from Europe. According to a Reuters report, the duty could be cut from 110% to around 40%. This move is part of the proposed Free Trade Agreement (FTA) between India and the European Union. The agreement may be announced tomorrow, Tuesday, at the India-EU Summit. Sources say the Modi government has agreed to immediately lower taxes on some cars priced above €15,000 (around ₹16.3 lakh). Volkswagen, Mercedes-Benz cars may become cheaper Under the FTA, India will reduce import duty to about 40% on nearly 200,000 petrol and diesel cars every year. Currently, imported cars in India attract duties ranging from 70% to 110%. Over time, this duty could fall further to 10%, making cars from European companies such as Volkswagen, Mercedes-Benz and BMW more affordable in the Indian market. At present, EU carmakers have less than a 4% share in India’s annual car market of 4.4 million units. Electric vehicles will be kept out of duty cuts for the first five years to protect domestic players like Tata Motors and Mahindra Mahindra. After that, duty reductions may also apply to EVs. EU Commission chief calls it ‘the mother of all deals’ Earlier, on January 20, European Commission President Ursula von der Leyen said a historic trade agreement between India and the EU is on the way. She said the FTA would create a new market for 2 billion people and represent nearly 25% of global GDP. Speaking at the World Economic Forum in Davos, she described it as the “mother of all deals”. She is visiting India from January 25 to 27, and the completion of the agreement may be announced at the India-EU Summit on January 27. Ursula von der Leyen said, I am travelling to India. There is still some work to be done, but we are on the threshold of a historic agreement. This deal will give Europe a first-mover advantage in trading with India, the world’s fastest-growing and most dynamic country. What will be the benefits of the agreement? This Free Trade Agreement (FTA) is expected to significantly boost trade between the two sides. Trade with the EU stood at $137.41 billion in 2023–24 and is expected to double after the agreement. The deal will reduce tariffs on goods and services, making trade easier. Both sides are also likely to announce a defence agreement and a strategic roadmap for 2026–2030. India–EU deal announced amid Trump tariffs The agreement comes at a time when former US President Donald Trump’s new tariff policies and trade restrictions have disrupted global supply chains. The US ‘tariff war’ has affected India as well as all 27 countries of the European Union. In this situation, both sides have decided to strengthen mutual trade. By signing agreements with European countries, India is looking for new markets for Indian products. A 19-year-long wait comes to an end The first attempt to negotiate an FTA between India and the European Union began in 2007. However, talks were suspended in 2013 due to differences over ambitions and regulations. After a gap of nearly nine years, negotiations resumed in June 2022. Now, the deal is expected to be finalised in early 2026. India has already signed a free trade agreement with the UK Earlier, India and the United Kingdom signed a free trade agreement on 24 July. This will make UK cars, whisky, clothing and footwear cheaper in India. The agreement was signed after around three years and 14 rounds of negotiations. Under the deal, 99% of Indian goods will be exported to the UK at zero tariff. In return, 99% of UK goods will be imported into India at an average tariff of 3%. This is expected to double bilateral trade to $120 billion by 2030.