New Delhi has proposed slashing import duties to 40 per cent immediately for about 200,000 combustion-engine cars a year, one of the sources said, its most aggressive move yet to open up the sector. This quota could be subject to last-minute changes, the source added.
Battery electric vehicles will be excluded from import duty reductions for the first five years to protect investments by domestic players like Mahindra & Mahindra and Tata Motors in the nascent sector, the two sources said. After five years, EVs will follow similar duty cuts.
MARKET CURRENTLY DOMINATED BY SUZUKI AND LOCAL MAKERS
Lower import taxes will be a boost for European automakers such as Volkswagen, Renault and Stellantis, as well as luxury players Mercedes-Benz and BMW which locally manufacture cars in India but have struggled to grow beyond a point in part due to high tariffs.
Lower taxes will allow carmakers to sell imported vehicles for a cheaper price and test the market with a broader portfolio before committing to manufacturing more cars locally, said one of the two sources.
European carmakers currently hold a less than 4 per cent share of India’s 4.4 million units a year car market, which is dominated by Japan’s Suzuki Motor as well as homegrown brands Mahindra and Tata that together hold two-thirds.
With the Indian market expected to grow to 6 million units a year by 2030, some companies are already lining up new investment.
Renault is making a comeback in India with a new strategy as it seeks growth outside Europe, where Chinese carmakers are making strong inroads, and Volkswagen Group is finalising its next leg of investment in India through its Skoda brand.
