Reports suggest that India is planning a significant reduction in import tariffs on automobiles, including electric vehicles (EVs), as part of a forthcoming trade agreement with the European Union (EU). The deal, potentially to be revealed at the India-EU summit on January 27, 2026, may see import duties on cars from the EU drop to 10-15%.

Currently, India levies a hefty import duty of around 100% on European automobiles with a landed cost exceeding $40,000 (approximately ₹37 lakh), which includes luxury EVs. This has made European luxury EVs, typically priced around ₹1 crore and above, significantly more expensive in the Indian market.

The proposed tariff reduction is expected to make European luxury EVs more competitive in the Indian market, potentially boosting sales for European manufacturers. European Commission President Ursula von der Leyen has stated that India and the EU are "on the cusp of a historic trade agreement".

However, India has been previously hesitant to sharply reduce tariffs on auto imports because a surge of European imports could hurt the domestic industry. The agreement is likely to include provisions that balance market access with protections for domestic manufacturers such as Tata Motors and Mahindra & Mahindra. It is expected that phased localization requirements and value-addition norms for EV makers will continue, ensuring that increased imports do not negatively affect India's long-term manufacturing goals.

According to the Global Trade Research Initiative (GTRI), the India-EU FTA is likely to lower costs and expand trade. GTRI Founder Ajay Srivastava said tariff elimination would compress input costs instead of crowding out industry. The EU's exports to India consist of high-end machinery, aircraft, core electronic components, chemicals, quality medical devices and metal scrap, which feed India's factories, recycling industry and MSME clusters, improving productivity and export competitiveness.

In fiscal year 2025, India-EU goods trade crossed $136 billion. The trade agreement is expected to benefit producers and consumers on both sides through tariff reductions that will primarily reduce input costs, deepen value-chain integration, and increase trade volumes. Indian exports to the EU include smartphones, garments, footwear, tyres, pharmaceuticals, auto parts, refined fuels and cut diamonds.