New Delhi: India decided to reduce car import tariffs to 40% as part of ongoing negotiations for a landmark trade agreement with the European Union, officials indicated on January 27, 2026.
The proposed cut in car import tariffs marked a major shift in India’s trade policy towards the automobile sector. According to sources, the move formed a key part of discussions aimed at advancing the long-pending India–EU free trade agreement.
Under the proposed framework, the tariff reduction would apply mainly to European cars priced above €15,000. As a result, the decision is expected to make premium European vehicles more affordable for Indian consumers.
Officials said the tariff cut was also intended to strengthen broader economic ties between India and the European Union. Moreover, it was seen as a confidence-building measure to accelerate trade negotiations that have remained stalled for years.
The development is expected to have a direct impact on the domestic automobile market. While consumers may benefit from lower prices, industry stakeholders are closely watching how the changes could affect local manufacturers.
Car import tariffs cut seen as boost to India–EU trade
Government sources said the reduction in car import tariffs was part of a balanced approach to trade liberalisation. India has been seeking greater access for its goods and services in European markets. In return, the EU has been pressing for lower duties on automobiles and other high-value products.
The move is likely to benefit European carmakers looking to expand their presence in India. At the same time, officials stressed that safeguards would remain in place to protect domestic manufacturing interests.
Trade experts said the decision could give fresh momentum to India–EU trade talks. If finalised, the agreement is expected to deepen cooperation across sectors such as manufacturing, technology, and clean mobility.
The discussions come at a time when India is actively pursuing trade agreements with major global economies. The proposed tariff cut signals India’s intent to position itself as a more open and competitive market while advancing strategic trade partnerships.
