110% to 10% in 10 years: Import tariff to be cut on some vehicles, but with 2.5L annual quota

New Delhi: It's advantage Mercedes, BMW and Audi. The FTA will reduce import tariffs for cars that cost upwards of Rs 25 lakh from EU from a high of 110% to 30% in the first year, to 10% in 10 years, with a quota of 2.5 lakh vehicles annually.

Tesla, however, will have to wait for five years as concessions on EVs kick in later. The other big gainers will be Stellantis, which has brands such as Jeep and Citroen in its portfolio, and Skoda-Volkswagen. Within the overall quota, officials said, there will be three segments with steeper reduction in duty on bigger cars, and Indian carmakers will have the option to export 2.5 cars to the 27-nation bloc for every European car sold in the country.




Officials said there will be no out-of-quota reduction in tariffs, which will help push domestic manufacturing as volumes go up and quotas are exhausted. Besides, there is no reduction in tariff on completely knocked down kits, which face 16% duty. Duty concessions will be available for a certain number of trucks while buses have been kept out.

Commerce and industry minister Piyush Goyal said: "India will open its door for greater import of auto components and automobiles having ensured sensitive items are kept out of ambit or given sufficient transition period for adjustment in economic cycles, like EU's interest was larger automobiles worth Rs 16 lakh to 22 lakh while we in India largely produce automobiles that are smaller in size and lower in costs so we reached an understanding where both German auto industry and Indian industry are happy."

Under the trade deal, a CIF value of ₹15,000 (around Rs 16.5 lakh) has been fixed and only cars above that level are entitled to benefits. The on-road price, including duties, taxes and other costs, will work out to around Rs 25 lakh.

European luxury carmakers cautioned against expecting price cuts from the deal. Mercedes-Benz India MD Santosh Iyer said rupee depreciation wiped out any potential tariff benefit. "Over 90% of our business is CKD units, so there is no foreseeable price reduction," he said, adding the agreement may still lift sentiment and support long-term investment plan. BMW Group India CEO Hardeep Singh Brar said 95% sales are made-in-India vehicles. Skoda Auto Volkswagen India MD and CEO Piyush Arora said FTAs help expand product choices and support long-term tech transfer and investment.

Indian automakers welcomed FTA, with Tata Motors (PV) MD and Society of Indian Automobile Manufacturers president Shailesh Chandra saying calibrated approach "must give us a win-win between increased global participation on the one hand and growth of domestic auto industry with investments and employment on the other hand, and enable increased choice for consumers in both regions".

Mahindra Group CEO Anish Shah said the deal "will not change competitive dynamics... as it lowers in-quota duties only at higher-priced segments, which will enhance scale in core segments relevant to Make-in-India for the world".

Both Indian carmakers will see investments in EVs protected, for 5 years at least.