India is set to drastically cut customs duties on cars imported from the EU by up to 40 percent

India plans to reduce customs duties on cars imported from the European Union to 40 percent, instead of the current maximum of 110 percent. This was reported by Reuters, referring to sources familiar with the negotiations. The move is considered the largest opening of the Indian auto market to date and is linked to the completion of negotiations on a free trade agreement with the EU, which the parties may announce in the coming days.

According to Reuters, the government of Indian Prime Minister Narendra Modi has agreed to immediately reduce customs duties for a limited number of European cars whose import price exceeds 15 thousand euros. According to sources, over time, this rate can be reduced to 10 percent, which will significantly facilitate the entry of European manufacturers, particularly Volkswagen, Mercedes-Benz and BMW, into the Indian market. At the same time, electric cars will be excluded from customs privileges for the first five years in order to protect local manufacturers.

According to the agency, India can apply a reduced customs duty for about 200,000 internal combustion engine vehicles per year, although this quota may be changed at the last stage. Currently, India is the world's third largest auto market after the US and China, but the market is largely controlled by local and Japanese manufacturers. The reduction of customs duties can change the structure of the market and stimulate new European investments in the country.