• The European Union is urging India to eliminate tariffs on car imports as part of ongoing trade negotiations.
• India is considering reducing tariffs from over 100% to 10%, despite opposition from domestic automakers.
• The negotiation pressure increased following similar requests from the Trump administration in the U.S.

The European Union is actively pushing India to abolish tariffs on car imports within the framework of a long-negotiated trade deal. According to sources, Prime Minister Narendra Modi’s government is prepared to enhance its offer to finalize these talks, indicating a readiness to reduce tariffs from over 100% to a proposed 10%. This potential concession arises despite significant lobbying efforts from India's automotive sector, which asserts that the country should maintain at least a 30% tariff to protect local manufacturers. Additionally, industry advocates are requesting that reductions on electric vehicle (EV) tariffs be postponed for four years to safeguard domestic production capabilities, as reported by Reuters.

The EU’s recent demands echo those made by the U.S. under the administration of Donald Trump, which has similarly sought the elimination of import duties on vehicles, including EVs. This growing international pressure has intensified scrutiny on India’s local carmakers, as tariff cuts could be a boon for European giants like Volkswagen, BMW, and Mercedes-Benz, who stand to gain greater access to India’s vast automotive market. Moreover, it could also pave the way for Tesla, which plans to introduce imported EVs in India, likely from its Berlin manufacturing plant, highlighting the potential significance of these negotiations for global car manufacturers. “The EU has come back asking for a better deal, and India wants to make a better offer,” remarked an industry insider, as reported by TRT.

India's Commerce Ministry conveyed these discussions and the current status of India’s position to representatives from both the heavy industries sector and the auto industry last week. Sources familiar with the discussions, who spoke anonymously to protect confidentiality, indicated that this exchange of proposals and demands is part of ongoing negotiations that have seen little resolution over recent years.

While the European Commission has refrained from commenting on the specifics of these discussions, spokesperson Olof Gill noted that “the EU and India have different approaches and objectives” in key areas which often results in varying levels of ambition. With India’s automotive market producing around 4 million vehicles annually, there is significant concern among local manufacturers regarding the implications of tariff reductions, which they believe could undermine investments aimed at bolstering local manufacturing.

Domestic companies like Tata Motors and Mahindra & Mahindra have emphasized the need for protective measures, particularly against imports of EVs, expressing worries that drastic tariff cuts could jeopardize established investments and future expansion plans. In alignment with proposals to the U.S., India’s automotive sector has suggested a tiered approach, initially reducing tariffs on selected petrol vehicles to 70%, followed by a phased cut to 30%, while postponing reductions on EVs until 2029.

Though it remains ambiguous whether India has formally articulated its 10% offer to the EU, analysts anticipate greater flexibility on both sides, especially given the looming threat of a global trade war and economic implications stemming from the Trump administration’s tariffs. India and the EU have engaged in these trade discussions for several years, with an agreement to conclude a deal by the end of the year reflecting a mutual interest in mitigating the effects of tariffs. This sentiment was echoed by António Costa, president of the European Council, emphasizing the urgency to decisively progress in negotiations with India, “If the EU is now feeling pressure to strike a deal with India, we need to see how we can capitalize on that. It’s all about leverage,” said one industry source, according to India Times.