Reuters: India to cut tariffs on European cars to 40%

India plans to cut tariffs on cars from the European Union from 110% to 40%. The two sides are close to a free trade agreement that could be announced as soon as Tuesday, reported sources to Reuters.

Prime Minister Narendra Modi's government has agreed to reduce the tax on a limited number of cars from the 27-nation bloc with an import price of more than 15,000 euros. It will eventually be reduced to 10%, making it easier for European automakers such as Volkswagen, Mercedes-Benz and BMW to enter the Indian market.

India and the EU are expected to announce the conclusion of lengthy negotiations on a free trade pact on Tuesday, after which the two sides will finalize the details and ratify what they are calling the "mother of all deals."

India is the world's third-largest auto market by sales after the United States and China. But its domestic auto industry remains one of the most protected. New Delhi currently levies tariffs of 70% and 110% on imported cars, a level often criticized by executives including Tesla CEO Elon Musk.

New Delhi has proposed an immediate reduction in import duties to 40% on about 200,000 internal combustion engine vehicles per year.

Battery electric vehicles will not be eligible for reduced import duties for the first five years, to protect investments by local manufacturers, including Mahindra & Mahindra and Tata Motors. After that, electric vehicles will receive similar tariff benefits.

The tax cut will allow automakers to sell imports cheaper and test the market. European brands currently account for less than 4% of the Indian market, which is dominated by Suzuki Motor, Mahindra and Tata. The market is expected to grow to 6 million cars a year by 2030, which is already stimulating new investment plans.

• In May last year, it became known that India, as part of its transition to a "green" economy, plans to ban the use of cars with diesel enginesThe gradual phasing out of gasoline and diesel in transportation is expected to reduce global demand for oil.