India may lower tariff on EU-made electric cars

India is considering lowering tariffs on not only US-built but also EU-made cars, including electric models. The government is discussing a free trade agreement (FTA) with the EU and may announce this change as part of the deal.

In a major strategic shift owing to pressure from Western countries, India is considering opening up its heavily protected auto industry. According to a report from Reuters, the EU proposed a zero tariff on its cars, and while India is unlikely to agree to such a sweeping change, it is weighing a significant concession.

India is looking at sharply reducing the customs duty on cars it imports from the EU from currently more than 100% to just 10%, a government official and two industry sources told Reuters. However, it would tariffs in a phased manner, possibly to prevent a sudden disruption to domestic players, including both car and part manufacturers.

India may reduce the customs duty only on imported cars with a minimum CIF value in the range of 25,000-35,000 dollars, at least in the initial phase. Such a move would shield Maruti Suzuki, Tata Motors, Mahindra & Mahindra, and other carmakers who have made substantial investments in local manufacturing. Even so, a potential tariff reduction may greatly benefit European luxury brands like Mercedes-Benz, Audi, BMW, and Porsche. Moreover, Tesla, too, may take advantage and import the Model Y.

The announcement comes just a few days after India said it could lower tariffs on US-built cars as part of a trade deal it is discussing to ease the trade tensions with its largest export market. Currently, the country levies a customs duty of up to 110% on imported EVs.

The Ministry of Commerce and Industry held a meeting with the Ministry of Heavy Industries and auto industry executives about the EU’s proposals. Domestic automakers oppose making imported cars cheaper, but this time around, the government is leaning towards the wishes of its global trade partners, possibly to secure favourable deals and capitalise on the West’s trade rift with China.

“We stand at a moment in history where India is well poised to convert the current situation into an opportunity,” Piyush Goyal, the Minister of Commerce and Industry, said at the India Global Forum in Mumbai on Monday. “We have an opportunity of a lifetime,” he added, underscoring India’s strong motivation to position itself as the West’s new preferred trade partner. In February, European Commission President Ursula von der Leyen visited India to meet Prime Minister Narendra Modi and the leaders agreed to conclude the FTA by the end of this year.

At present, India imposes steep customs duties on EU-built cars, making them significantly more expensive than in Europe. For instance, while the base Porsche Taycan retails at 102,600 euros in Germany, in India, it carries a sticker price of 16,978,000 rupees, which converts to roughly 177,500 euros, or 73% more.

reuters.com, youtube.com(India Global Forum; Video)