European Union prepares for a major tax cut on cars, BMW-Mercedes to become cheaper

The Indian government is preparing to reduce import duties on European cars from 110% to 40% under a proposed free trade agreement with the European Union. Premium, fully-built cars will initially receive the relief, which is likely to make cars like BMWs and Mercedes-Benz cheaper.

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If you’re a fan of luxury and premium cars imported from abroad, there’s big news for you. The Indian government is preparing to significantly reduce the hefty import tax on cars under a free trade agreement with the European Union. According to a Reuters report, this important agreement could be announced by Tuesday, January 27th. This proposal calls for reducing the current import duty of 110% on EU-made cars to 40%. If this happens, it will open up India’s automobile market even more than it has been so far.

Which cars will be subject to tariff reduction in the initial phase?

According to media reports, the tariff reduction will initially apply only to a limited number of fully built cars priced above 15,000 euros (approximately €16.3 lakh). This means that the relief will be limited to premium-segment vehicles for now.

Import duty may decrease further over time

Sources say there are plans to further reduce these import duties to 10% in the future. If this happens, it will become easier for European companies like Volkswagen, Mercedes-Benz, and BMW to sell cars in the Indian market.

Relief will be provided on approximately 2 lakh petrol-diesel cars every year.

According to the report, India has agreed to immediately reduce duties on approximately 200,000 internal combustion engine (petrol and diesel) vehicles each year. However, this number may change after final negotiations.

EVs will not get exemption for the first five years

Battery electric vehicles (EVs) will be exempted from this tariff cut for the first five years to protect domestic companies’ investments. Sources say similar exemptions may be extended to EVs later.

Negotiations on India-EU Free Trade Agreement almost complete

The completion of negotiations on a comprehensive Free Trade Agreement (FTA) between India and the European Union is expected to be announced soon. This would be a major step forward in negotiations that have been stalled for several years. However, even after the agreement is announced, both sides will need to finalize it and give their formal approval (ratification) before it can be implemented. Only then will the agreement become fully effective.

India is the world’s third largest car market, yet import taxes are heavy.

India is the world’s third-largest car market, after the US and China. Despite this, import duties on foreign cars are very high. Currently, fully built cars are subject to taxes ranging from 70% to 110%. This has led executives from several global auto companies to criticize India’s policy.

European cars could become cheaper if taxes are reduced.

According to sources, if the government cuts import duties, European car companies will be able to price their vehicles more competitively in India. This will allow companies like Volkswagen, Mercedes-Benz, and BMW to launch new models in India and gauge market demand before investing in large-scale manufacturing here.

The matter is related to the visit of European leaders to India.

The proposed tariff cuts come as European Commission President Ursula von der Leyen is on a four-day visit to India, where she attended the Republic Day celebrations along with European Council President Antonio Costa.

Crucial meeting with PM Modi, FTA announcement expected

European leaders will hold talks with Prime Minister Narendra Modi. It is expected that a Free Trade Agreement (FTA) between India and the European Union may be announced during this meeting. Issues such as a strategic defense partnership and facilitating the movement of Indian professionals in Europe are also likely to be discussed. However, there has been no official statement from India’s Commerce Ministry or the European Union regarding these reports.

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