Imported European Cars Are To Be Cheaper In India, As The BJP Government Slashes Tariffs To 40%.

New Delhi; January 2026: India plans to slash tariffs on cars imported from the European Union from 110% to 40%, in the biggest opening yet of the country’s vast market as the two sides close in on a free trade pact that could come as early as Tuesday. This will be further lowered to 10% over time, they added, easing access to the Indian market for European automakers such as Volkswagen, Mercedes-Benz and BMW. Prime Minister Narendra Modi’s government has agreed to immediately reduce the tax on a limited number of cars from the 27-nation bloc with an import price of more than 15,000 euros ($17,739), as per official sources.

Meanwhile, India’s commerce ministry and the European Commission declined to reveal the details, while the pact has already been dubbed as the Mother Of All Deals’. Both the countries are expected to publicly announce the deal on Tuesday, 27th January immediately after the celebrations of the 77th Republic Day.

As publicised, the pact could expand bilateral trade and lift Indian exports of goods such as textiles and jewellery, which have been hit by 50% U.S. tariffs since late August 2025.

India is the world’s third-largest car market by sales after the U.S. and China, but the domestic automobile industry has remained to be one of the most protected. India currently levies tariffs of 70% and 110% on imported cars, a level often criticised by executives, including Tesla chief Elon Musk.

So now, India have proposed slashing the import duties to 40% immediately for about 200,000 combustion-engine cars a year, as per official sources, its most aggressive move yet to open up the sector. This quota could be subject to last-minute changes, the source added.

Battery electric vehicles will be excluded from import duty reductions for the first five years to protect investments by domestic players like Mahindra & Mahindra, and Tata Motors in the nascent sector, the two sources said. After 05 years EVs will follow similar duty cuts, enabling the Indian Manufactures consolidate their market positions.

The reduction in import duties will be an inevitable boost for European automakers such as Volkswagen, Renault and Stellantis, as well as luxury players Mercedes-Benz and BMW which locally manufacture cars in India but have struggled to grow beyond a point in part due to high tariffs.

Lower taxes will also boost the carmakers to sell imported vehicles for a cheaper price and test the market with a broader portfolio before committing to manufacturing more cars locally, said one of the two sources.

European carmakers currently hold a less than 4% share of India’s 4.4-million units a year car market, which is dominated by Japan’s Suzuki Motor as well as homegrown brands Mahindra and Tata that together hold two-thirds. With the Indian market expected to grow to 6 million units a year by 2030, some companies are already lining up new investment.

On the otherside, Renault is making a comeback to India with a new strategy as it seeks growth outside Europe, where Chinese carmakers are making strong inroads, and Volkswagen Group is finalising its next leg of investment in India through its Skoda brand.

Team Maverick.