By Micah Jonah
January 29, 2026
India will immediately reduce import duties on high-end European cars to 30%, down from rates as high as 110%, following the finalization of a long-delayed trade agreement with the European Union. The move opens the country’s tightly controlled automotive market to luxury carmakers such as BMW and Mercedes-Benz.
The agreement, announced on Tuesday, cuts tariffs on most imported goods and is seen as a step to boost trade amid growing global uncertainty and tensions with the United States. India, the world’s third-largest car market after the US and China, has long protected its domestic auto industry with tariffs ranging from 70% to 110% on imported vehicles.
Under the deal, European cars priced between €35,000 and €50,000 will face a 30% duty, with annual imports capped at 33,000 units. Cars costing more than €50,000 will also see tariffs cut to 30%, while the category of €15,000–€35,000 cars will have a duty of 35% with a 34,000-unit annual cap. The combined import cap for all categories will rise to 160,000 units over ten years.
In addition, India will reduce import duties on 20,000 European-made electric vehicles (EVs) to 30–35%, though this will only take effect five years after implementation. Tariffs on EVs priced above €20,000 will gradually drop to 10% over time, while annual import quotas will rise to 90,000 units, protecting domestic manufacturers such as Tata Motors and Mahindra.
Luxury vehicles currently make up less than 1% of the 4.4 million passenger vehicles sold in India last year. Analysts say that while the duty cuts may not immediately translate to lower prices, they will allow automakers to expand model line-ups, increase technology transfer, and strengthen supply chains.
European carmakers Volkswagen, Renault, and Stellantis have also expressed optimism, noting that lower tariffs could accelerate investment and development in the Indian market.
