Exclusive: India to slash tariffs on cars to 40% in trade deal with EU, sources say - Reuters

According to an exclusive report from Reuters, published on January 26, 2026, India is reportedly poised to significantly reduce its tariffs on imported cars. Sources indicate that as part of a forthcoming trade deal with the European Union (EU), India plans to slash these tariffs to 40%. This development signals a potential shift in India's trade policy for the automotive sector, with substantial implications for international trade.

This prospective tariff reduction holds significant implications for businesses involved in the automotive sector, particularly those importing vehicles into India from EU member states. Importers, customs brokers, and trade compliance officers dealing with European-manufactured cars should take note of this development. A reduction to 40% would likely make European cars more competitive in the Indian market, potentially altering supply chain strategies and market dynamics for both EU exporters and Indian importers.

The key detail emerging from the report is the proposed tariff rate of 40% for cars. It is crucial to understand that this rate is contingent upon the finalization of a comprehensive trade agreement between India and the European Union. While the news was published on January 26, 2026, the actual effective date for this tariff change would depend on the official signing and implementation of the broader trade deal. Importers should monitor official announcements from both Indian and EU authorities for definitive timelines and specific Harmonized System (HS) codes that would be affected.

For importers and trade compliance professionals, this news underscores the importance of proactive planning and vigilance. It is advisable to:

• Stay Informed: Continuously monitor official government and trade negotiation updates from both India and the European Union regarding the progress and final terms of the trade deal.
• Assess Impact: Begin evaluating how a 40% tariff rate could affect the landed cost, pricing, and demand for European cars in the Indian market.
• Review Supply Chains: Consider potential adjustments to sourcing and logistics strategies if the tariff reduction comes into effect.
• Prepare for Implementation: Once details are confirmed, ensure your customs brokerage and compliance teams are ready to implement the new tariff rates and any associated rules of origin that typically accompany free trade agreements.

This development, if confirmed, represents a notable shift in India's trade policy for the automotive sector, offering new opportunities for EU-India trade.