India is considering steep reductions in car import duties as part of a proposed trade deal with the European Union, Reuters reported.

Citing sources familiar with the matter, the report said New Delhi intends to cut tariffs on certain European vehicles to 40%, down from current rates of up to 110%, once the deal is finalized and announced.

A smaller group of cars priced above €15,000 (Rs 1.63 crore) would see immediate relief, with taxes eventually dropping to 10%.

The move would open the door wider for manufacturers such as Volkswagen, Mercedes-Benz and BMW.

Officials involved in the discussions told Reuters the changes could support bilateral trade and help Indian exporters of goods such as textiles and jewelry that have faced 50 percent U.S. tariffs since late August.

India, described as the world’s “third largest auto market” after the United States and China, currently imposes duties of 70% to 110% on imported vehicles.

A source said the government has suggested allowing about 200,000 petrol and diesel cars a year at the reduced 40% rate, although that figure remains subject to review.

Battery electric vehicles (BEVs) will not benefit from lower rates for five years, reflecting efforts to protect domestic investors such as Mahindra & Mahindra and Tata Motors.

After that period, electric vehicles would face comparable reductions.

European brands account for less than 4% of India’s 4.4 million-unit passenger car market, which is dominated by Suzuki Motor along with Mahindra and Tata, with about two-thirds combined.

With annual sales forecast to reach six million by 2030, companies such as Renault and Volkswagen Group are preparing new investment plans through their operations in India.

“Report on India-EU car tariff cuts outlined in trade talks” was originally created and published by Automatic onlya trademark owned by GlobalData.

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