India-EU Trade Deal: Car Import Duty Slashed to 10% with Key Condition
India has agreed to slash import duties on European Union cars from 110% to just 10% under a proposed free trade agreement. However, the steep cut comes with a major rider: it will apply only to vehicles with at least 50% EU-made components.
Key Takeaways
- Import duty on EU cars to drop from ~110% to 10%.
- Benefit restricted to cars with 50% or more EU-origin parts.
- Move aims to boost European luxury carmakers in India.
- Condition prevents UK or other nations from routing cars via EU.
Why the 50% Rule?
Sources familiar with the matter said the 50% component rule is designed to stop cars from other countries, like the UK, from being funnelled into India through the EU to exploit the lower duty. This ensures only genuinely European-made vehicles get the benefit.
Current Duty Structure & Impact
Currently, India imposes a 70% duty on cars priced below $40,000 and 100% on those above. With additional cess, the effective rate reaches about 110%. The proposed cut to 10% is a significant win for European luxury brands like , BMW, Audi, and Volkswagen operating in the Indian market.
Broader Trade Negotiations
India and the EU have been negotiating this free trade pact for years, with talks gaining momentum recently. The deal is expected to be signed after the new government takes charge post the ongoing general elections.
Separately, with the UK are stalled, partly over rules of origin for cars. The UK wants its cars treated as British even with foreign parts, while India demands stricter origin criteria.
A Landmark Deal in the Making
The EU-India FTA is poised to be a landmark agreement, boosting bilateral trade and investment. Beyond automobiles, it is expected to cover areas like intellectual property, government procurement, and sustainable development.
