India to Cut Tariffs on High-End EU Cars to 30% in Boost for Luxury Carmakers
New Delhi – India has decided to sharply reduce import tariffs on high-end European cars to 30 percent, marking one of the most significant openings of its tightly protected automobile market in decades. The move follows the conclusion of a long-awaited trade agreement between India and the European Union aimed at deepening economic ties and boosting bilateral trade.
The tariff cut applies immediately to premium European vehicles that were previously subject to import duties as high as 110 percent. By lowering these levies, India is offering a major incentive to global luxury carmakers such as BMW, Mercedes-Benz, and other European brands seeking to expand their footprint in the fast-growing Indian market.
India is currently the world’s third-largest car market by volume, trailing only the United States and China. Despite its size, the country has long maintained high barriers to protect domestic manufacturers, making imported cars prohibitively expensive and limiting consumer choice in the luxury segment.
Under the new trade arrangement, the steepest tariff reductions will apply to cars priced above 35,000 euros. Vehicles in this category will now face a flat 30 percent duty, significantly improving their competitiveness and allowing automakers to introduce a wider range of models into India.
Cars priced between 15,000 euros and 35,000 euros will see import duties reduced to 35 percent. Annual import caps have been placed across different price brackets, with a total quota initially set at 100,000 units per year to manage the pace of market opening.
According to officials, these import quotas will gradually increase over time, reaching up to 160,000 units annually over the next decade. This phased approach is designed to balance foreign competition with the interests of India’s domestic auto industry.
The trade deal comes at a time when governments across the world are re-evaluating trade relationships amid shifting global economic conditions. For India and the EU, the agreement represents a strategic effort to strengthen supply chains, enhance market access, and reduce reliance on uncertain external trade policies.
Although the tariff cuts are substantial, industry executives caution that consumers may not see immediate price reductions. Instead, automakers are expected to use the lower duties to expand product portfolios, introduce newer technologies, and test demand for higher-end models.
Luxury cars currently account for less than one percent of total passenger vehicle sales in India. However, rising incomes and a growing appetite for premium goods suggest strong long-term potential for the segment, particularly in major urban centers.
European manufacturers beyond the luxury segment are also expected to benefit. Companies such as Volkswagen, Renault, and Stellantis see the agreement as an opportunity to strengthen technology transfer, deepen local partnerships, and integrate Indian operations more closely into global supply chains.
Electric vehicles have also been included in the deal, though with a delayed timeline. India has agreed to cut import duties on European-made electric cars priced above 20,000 euros to between 30 and 35 percent, but only after five years.
This delay is intended to protect domestic electric vehicle manufacturers, who are still building scale and infrastructure. Over time, EV tariffs are expected to fall further, eventually reaching 10 percent, with annual import quotas expanding significantly.
Overall, the tariff cuts signal a clear shift in India’s trade and industrial strategy. By selectively opening its market, India aims to attract investment, encourage competition, and offer consumers greater choice while still safeguarding domestic manufacturing growth.
