According to sources reported by Reuters, there is an ongoing negotiation between the European Union and India regarding the elimination of tariffs on car imports. The EU is pushing for India to remove tariffs on car imports as part of a trade deal that has been in discussion for a long time. Prime Minister Narendra Modi's government is considering enhancing its current proposal in order to finalize the negotiations.
Industry sources and a government official mentioned that India is open to gradually reducing tariffs on car imports from over 100% to 10%. Despite some sectors advocating for India to keep a 30% tariff initially, India is considering lowering it. The EU's request for tariff elimination aligns with similar demands made by the US administration in bilateral trade discussions with India, which has put pressure on local car manufacturers.
If the tariffs are reduced, it would benefit European carmakers like Volkswagen, Mercedes-Benz, and BMW, providing them with greater access to the Indian market. Additionally, this move could also be advantageous for Elon Musk's Tesla, which is set to commence sales of imported EVs in India this year.
During a meeting last week, India's commerce ministry conveyed the EU's demands and India's position to officials from the heavy industries ministry and representatives from the auto industry. The talks are ongoing and confidential, so the sources spoke anonymously. The European Commission refrained from commenting on specific details but acknowledged differences in approach and objectives between the EU and India in their discussions.
India's auto market, which produces around 4 million units annually, is heavily protected, with domestic carmakers expressing concerns that sharp tariff reductions could undermine local manufacturing investments by making imported vehicles more competitive. Companies like Tata Motors and Mahindra & Mahindra have particularly opposed lowering import tariffs on EVs, asserting that it could negatively impact their significant investments and future plans in the sector.