NEW DELHI/BRUSSELS: India is about to make its boldest transfer but to open its tightly protected auto market, agreeing to sharply lower import tariffs on automobiles from the European Union as a part of a long-awaited free commerce settlement nearing completion, in line with sources acquainted with the talks.
India plans to cut back tariffs on EU-imported automobiles to 40 p.c from ranges as excessive as 110 p.c, the sources stated, in a transfer anticipated to considerably enhance market entry for European automakers as New Delhi and Brussels shut in on a landmark commerce pact that may very well be introduced as early as January 27.
Prime Minister Narendra Modi’s authorities has agreed to instantly decrease duties on a restricted variety of automobiles from the 27-nation bloc priced above 15,000 euros (US$17,739), two sources briefed on the negotiations instructed Reuters. Over time, the tariff can be additional decreased to 10 p.c, they added.
The transfer would ease entry into India’s marketplace for European carmakers, together with Volkswagen, Mercedes-Benz, and BMW.
The sources declined to be recognized as a result of the negotiations are confidential and will nonetheless change. India’s commerce ministry and the European Commission declined to remark.
Pact already dubbed ‘mom of all offers’
India and the EU are anticipated to announce this week the conclusion of years-long negotiations on the free commerce pact, after which the settlement can be finalised and ratified. The deal has already been dubbed “the mother of all deals.”
The pact may considerably develop bilateral commerce and enhance Indian exports, akin to textiles and jewelry, which have been hit by a 50 p.c U.S. tariff since late August.
India is the world’s third-largest automotive market by gross sales after the United States and China, but it surely stays one of the protected. Import duties at the moment vary from 70 p.c to 110 p.c, a coverage usually criticised by executives, together with Elon Musk.
New Delhi has proposed chopping import duties instantly to 40 p.c for about 200,000 combustion-engine automobiles yearly, one supply stated, marking its most aggressive liberalisation of the sector so far. That quota may nonetheless be adjusted, the supply added.
Battery electrical automobiles can be excluded from obligation cuts for the primary 5 years to guard investments by home producers akin to Mahindra & Mahindra and Tata Motors, the sources stated. After that interval, EVs can be topic to related tariff reductions.
Market at the moment dominated by Suzuki and native makers
Lower tariffs would profit European producers, together with Renault and Stellantis, in addition to luxurious manufacturers Mercedes-Benz and BMW, which already manufacture domestically however have struggled to develop gross sales, partially on account of steep import taxes.
Reduced duties would permit carmakers to promote imported fashions at extra aggressive costs and take a look at client demand with a broader vary of automobiles earlier than committing to further native manufacturing, one of many sources stated.
European automakers at the moment account for lower than 4 p.c of India’s 4.4-million-unit annual automotive market, which is dominated by Suzuki Motor and Indian manufacturers Mahindra and Tata, which collectively management about two-thirds of gross sales.
With India’s automotive market anticipated to develop to round 6 million models yearly by 2030, some producers are already positioning for growth. Renault is returning to India with a revamped technique because it appears to be like past Europe for development, whereas Volkswagen Group is finalising its subsequent part of funding within the nation by means of its Skoda model.