India considers slashing import duties on high-end cars to ease trade deals
Sources tell CNBC-TV18 that India is unlikely to offer unilateral tariff concessions to the US on automobiles. However, the government could lower tariffs on imports of cars worth ₹40 lakh and above.
India is reportedly considering a significant reduction in tariffs on premium imported cars, potentially paving the way for smoother trade negotiations with the United States, the United Kingdom, and the European Union.
Sources familiar with the matter suggest that while India is firm on not offering any unilateral concessions to the US, a substantial cut in duties on high-end vehicles priced above ₹40 lakhs, coupled with a fixed annual quota, is under active discussion within the government.
Despite facing pressure from the US government, India remains steadfast in its position against offering any exclusive tariff reductions to Washington in the automobile sector, where import duties on fully built cars currently stand at 100%. The Indian government's immediate priority is to finalise a bilateral trade deal with the US and secure relief from America's 26% tariff on certain goods.
However, sources indicate a strong intent within the government to substantially lower tariffs on imported cars, with the focus currently on premium vehicles. The government is actively exploring various scenarios to offer these tariff concessions, although a final decision is yet to be made.
The potential tariff adjustments are not just relevant to US automakers. Electric vehicle giant Tesla's entry into the Indian market is also closely linked to the outcome of the India-EU Free Trade Agreement (FTA). With Tesla planning to import vehicles from its Berlin factory rather than the United States.
Crucially, India would need to extend any tariff cuts offered in the automobile sector equally to the US, the UK, and the European Union, as all three have specifically requested reductions in these duties.
Furthermore, the response to India's recently announced scheme to encourage domestic manufacturing of electric vehicles is also likely to be influenced by the tariff cuts offered to these major trading partners.
While the scheme offers a 15% concession on import duty over the prevailing 100% rate, it requires companies to commit to manufacturing in India with a minimum investment of $500 million. With the detailed guidelines for the scheme yet to be released, all major car manufacturers are expected to first assess India's overall tariff reduction strategy before committing to such a significant investment.
Sources familiar with the matter suggest that while India is firm on not offering any unilateral concessions to the US, a substantial cut in duties on high-end vehicles priced above ₹40 lakhs, coupled with a fixed annual quota, is under active discussion within the government.
This development comes as automobile tariffs have emerged as a crucial sticking point in India's ongoing trade discussions with the three major economic blocs. For many nations, securing favourable terms on auto tariffs is seen as a critical factor in the overall success of any potential trade agreement.
Despite facing pressure from the US government, India remains steadfast in its position against offering any exclusive tariff reductions to Washington in the automobile sector, where import duties on fully built cars currently stand at 100%. The Indian government's immediate priority is to finalise a bilateral trade deal with the US and secure relief from America's 26% tariff on certain goods.
However, sources indicate a strong intent within the government to substantially lower tariffs on imported cars, with the focus currently on premium vehicles. The government is actively exploring various scenarios to offer these tariff concessions, although a final decision is yet to be made.
The potential tariff adjustments are not just relevant to US automakers. Electric vehicle giant Tesla's entry into the Indian market is also closely linked to the outcome of the India-EU Free Trade Agreement (FTA). With Tesla planning to import vehicles from its Berlin factory rather than the United States.
Crucially, India would need to extend any tariff cuts offered in the automobile sector equally to the US, the UK, and the European Union, as all three have specifically requested reductions in these duties.
Furthermore, the response to India's recently announced scheme to encourage domestic manufacturing of electric vehicles is also likely to be influenced by the tariff cuts offered to these major trading partners.
While the scheme offers a 15% concession on import duty over the prevailing 100% rate, it requires companies to commit to manufacturing in India with a minimum investment of $500 million. With the detailed guidelines for the scheme yet to be released, all major car manufacturers are expected to first assess India's overall tariff reduction strategy before committing to such a significant investment.
(Edited by : Ajay Vaishnav)
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