NEW DELHI: India has agreed to grant European automakers access to its tightly protected car market through an unprecedented import quota under the proposed trade pact with the European Union, sharply lowering tariffs and signaling a reset in bilateral trade ties, Bloomberg News Service reported, citing people familiar with the negotiations.
Under the agreement, India will gradually allow up to 250,000 European-made vehicles to be imported at preferential duty rates — more than six times the quota of about 37,000 units offered to the UK under a separate trade deal. Of the total, around 160,000 internal combustion engine (ICE) vehicles will see import duties reduced to 10% within five years. For 90,000 electric vehicles (EVs), the same duty level will apply only by the 10th year, reflecting India’s intent to protect its nascent EV ecosystem. Initial in-quota tariffs will start at about 30% for most segments.
Beyond the quota, India has agreed to cut tariffs on fossil-fuel-powered European cars to 35% over 10 years — a significant reduction from current rates that can go as high as 110%. The concessions are expected to benefit major European automakers including Volkswagen AG, Mercedes-Benz Group AG, Stellantis NV and Renault SA.
The pact includes a review clause under which quotas can be reassessed periodically to reflect India’s rapidly growing auto market and any concessions extended to future trade partners, including the US. These reviews will be linked to negotiations on steel, a key priority area for India, giving both sides leverage in future discussions.
The scale of the quota underscores the EU’s much larger auto market and highlights how both sides are using the agreement to recalibrate their trade relationship. While Europe gains deeper access to one of the world’s fastest-growing auto markets, India secures reciprocal concessions for its own manufacturers as it seeks to expand exports and boost domestic manufacturing.
As part of the deal, the EU will offer Indian automakers such as Mahindra & Mahindra Ltd., Tata Motors Passenger Vehicles Ltd. and Maruti Suzuki India Ltd. import concessions covering up to 625,000 vehicles. Tariffs on India-made EVs imported into the bloc within quotas will be eliminated over 10 years. Smaller, lower-cost EVs will see a slower phase-in over 14 years, starting with 27,500 units in the fifth year and rising to 125,000 units — roughly 2% of the EU market based on current forecasts.
India has also agreed to reduce out-of-quota tariffs on European ICE vehicles to between 30% and 35% over a decade. In addition, European carmakers will be allowed to export up to 75,000 vehicles a year, priced above €15,000, for assembly in India from completely knocked-down kits, with tariffs cut to 8.25% from 16.5%. Duties on car parts will be reduced to zero, supporting deeper supply-chain integration.
While the deal offers European automakers a clearer pathway to expand their presence in India — potentially with lower local manufacturing commitments — the value of the concessions will depend on how quickly tariff reductions take effect and whether demand in India’s premium and EV segments grows as expected.
The agreement stops short of a full market opening, reflecting the limits faced by the EU in negotiations with India, particularly after New Delhi linked progress to its demands on steel. Even with the pact, new EU regulations in that sector are expected to constrain India’s effective market access, Bloomberg News Service reported.