India to Cut Import Duty on Mercedes-BMW Cars by 40% Under EU Trade Deal

New Delhi: The long-running Free Trade Agreement (FTA) negotiations between India and the European Union (EU) are now in the final stages, and it is likely to be formally announced on January 27, 2026. Under this agreement, India is planning to reduce the heavy tariff imposed on cars imported from the 27-member EU from the current 110% to 40%. It is also targeted to bring it down to 10% sequentially later, taking the Indian market towards its biggest ever automotive shell.

Why is the tariff on imported cars being reduced?

Such reduction in tariffs is an attempt to make trade between India and the EU more open and competitive, which will strengthen cooperation between the two economies.

Will this apply to premium cars?

According to sources, the primary benefit of this reduction will be given to those cars whose international import price is more than 15,000 euro (approximately Rs 16.24 lakh), such as models of Volkswagen, Mercedes-Benz, BMW, Renault, and Stellantis.

Will all vehicles be included?

For now this concession will not apply to battery electric vehicles (EV). To protect the domestic industry, EVs have been kept out of duty cuts for the first five years.

Will European companies get an opportunity?

The 40% tariff will allow European automakers to gain easier entry into India's growing auto market and pursue investment plans without local manufacturing.

Are domestic companies at risk?

The idea of ​​keeping EVs out of the deal for some time shows that an effort is being made to provide security to domestic companies like Tata Motors and Mahindra.

Will consumers get benefits?

The reduction in tariffs could lead to a decline in the prices of imported premium cars, making these vehicles more affordable and available to Indian consumers.

What will Indian exporters get from the FTA?

The agreement is not limited to cars only. This can provide better access to the large EU market for India's sectors like textiles, jewellery, household goods, and electronics, which will also boost exports.

Will this agreement affect global trade?

This deal can further shift India's policy towards free trade amid global trade pressure, which will increase the competitiveness of Indian products in markets around the world.

When will the agreement be formally announced?

According to sources, this FTA between India and the EU is expected to be finally announced on 27 January 2026, after which both parties will start the process of implementing it.

Can the tariff be reduced further after this?

The government has indicated that it plans to reduce tariffs further over time after the initial reduction, making this move likely to be part of a long-term strategy in the Indian auto sector.

The introduction of the new policy may change the direction of competition between the Indian auto market and European companies, and this deal is being seen as a strategic benefit for both parties.