According to Reuters, Prime Minister Narendra Modi’s government is prepared to soften its present offer in order to finalize the negotiations with the European Union, which wants India to remove auto import duties under a long-standing trade agreement.
India is amenable to gradually lowering tariffs from over 100% to 10%, according to two business sources and a government official. This is in spite of industry pushing for India to keep import charges on EVs at a minimum of 30% even if it begins to lower the duty and to refrain from changing them for another four years in order to safeguard indigenous companies.
Pressure on domestic automakers has increased since the EU’s demands, which came weeks after the U.S. President Donald Trump’s government sought a similar removal of import levies on automobiles, including EVs, as part of bilateral trade discussions with India.
European automakers like Volkswagen, Mercedes-Benz, and BMW will benefit from lower tariffs since they will have easier access to India. Elon Musk’s Tesla, which is expected to start selling imported EVs in India this year from its Berlin plant, may potentially benefit from it.
One of the industry sources stated, “India wants to make a better offer and the EU has returned asking for a better deal.”
In a meeting last week with representatives from the heavy industries ministry and the car sector, India’s commerce ministry explained the EU’s requests and India’s position, according to the three sources.
Due to the continuing and confidential nature of the negotiations, the sources who are aware of the discussions spoke on condition of anonymity.
The European Commission released a readout of its most recent round of negotiations with India in March, but refuses to comment on specifics.
“The EU and India have different methods and goals for many of the important areas. In certain instances, this results in varying degrees of ambition,” said Olof Gill, the commission’s trade spokesperson, in a statement.
Emails requesting comment were not answered by India’s commerce ministry or the Society of Indian Automobile Manufacturers (SIAM), which represents major automakers on the third-largest auto market in the world.
Heavily protected market
Sharp tariff reduction, according to domestic automakers, would eliminate investment in local production by making imports more affordable. India’s automobile market, which produces 4 million units annually, is among the most protected in the world.
Businesses like Mahindra & Mahindra and Tata Motors have specifically fought against decreasing import duties on EVs, claiming it will harm a sector in which they have made significant investments and intend to increase their spending.
Like its proposal to the United States, India’s auto industry has suggested lowering tariffs on a select few gasoline-powered vehicles from over 100% to 70% right away, with further reductions to 30%. According to the sources, automakers want a phased drop in limited imports to 30% after no tariff cuts on EVs until 2029.
Given the risk of a global trade war and the potential recession caused by Trump’s significant tariff rises, analysts anticipate that both parties will be more accommodating in negotiations, even if it was not immediately obvious whether India had already made its 10% tariff offer to the EU.
In an effort to lessen the impact of tariffs, India and the EU agreed in February to finalize the trade agreement by the end of the year after engaging in discussions for several years.
Last week, European Council President António Costa declared on the social media site X that it was time to “decisively advance in negotiations with India.”
“We must look for ways to profit if the EU is currently under pressure to reach an agreement with India. Leverage is key, according to the first industry source.
