India-EU FTA: New Delhi To Cut Tariffs To 40% For Mercedes, Other Players, Reports Say

In a massive boost to the European automobile market, India is mulling to reduce tariffs on cars imported from the European Union to 40% from as high as 110%, sources told news agency Reuters.

Narendra Modi-led BJP government has agreed to immediately slash taxes on a limited number of cars from the 27-nation bloc with an import price of more than 15,000 euros ($17,739), as per reports. 

The development comes as the two parties inch closer to seal free trade agreement that could come as early as Tuesday. Down the line, the tax will be further bumped down to 105 the reports stated. 

The drastic opening up of the Indian market to EU car makers like Volkswagen, Mercedes-Benz and BMW gains them easier access to a scantly occupied space. Lesser levies also allow carmakers to sell imported vehicles for a cheaper price 

However, the decision is still subject to last-minute changes as talks advance, the reports said. Additionally, Battery electric vehicles have been exempted from import duty reductions for the first five years to protect investments by domestic players like Mahindra & Mahindra and Tata Motors. 

Presently, EU holds only  4% share of India's 4.4-million units a year car market. The market is dominated by Japan's Suzuki Motor as well as homegrown brands Mahindra and Tata that together hold two-thirds.

The auto sector is one of the most protected sectors in India, with levies on imported cars anywhere between  70% and 110%

Free Trade Agreement between EU and New Delhi has been termed as 'Mother of All Deals' and is expected to be finalised by Tuesday. 

The deal could expand bilateral trade and lift Indian exports of goods such as textiles and jewellery, which have been hit by 50% U.S. tariffs since late August.
 

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