The United States is exerting pressure on India to eliminate tariffs on car imports as part of a forthcoming trade deal, according to insiders. New Delhi, however, has shown hesitance in zeroing out these duties promptly and is contemplating gradual reductions.
According to three sources, discussions regarding India’s steep auto tariffs, which may facilitate Tesla’s entrance into the Indian market, will soon take center stage in anticipated trade talks.
India’s import taxes, which can climb as high as 110%, have been lambasted by Tesla’s CEO Elon Musk as excessively burdensome, forcing the electric vehicle behemoth to pause its India launch plans last year.
Musk’s stance finds support in U.S. President Donald Trump, who has criticized India’s high tariffs and threatened reciprocal measures, stressing in a Congressional address on Tuesday the necessity of tariff reductions.
The U.S. is pushing for near-zero tariffs across most sectors except agriculture, said the first source, indicating the stark focus on automotive tariffs.
India, while attentive to U.S. demands, has not formally opposed them and plans to disclose its stance following consultations with local industries. The United States Trade Representative, alongside India’s trade and foreign affairs ministries, remained tight-lipped on the issue.
Following discussions between Trump and India’s Prime Minister Narendra Modi, both countries aim to sort out tariff discrepancies and strike the initial part of a trade agreement by late 2025, with a target to boost bilateral trade to $500 billion by 2030.
In the U.S. this week, Indian Trade Minister Piyush Goyal met with U.S. Commerce Secretary Howard Lutnick to advance these trade discussions and is expected to confer with the United States Trade Representative Jamieson Greer.
Despite the U.S. pushing for immediate tariff eliminations on car imports, India is preparing its industry for a potential decrease in tariffs and increased competition, as per one source and a further insider. Last month, Indian officials engaged with local car manufacturers to gauge their concerns about immediate tariff reductions.
India’s substantial domestic car market, exporting roughly 4 million vehicles annually, is heavily safeguarded, with leading manufacturers such as Tata Motors and Mahindra & Mahindra arguing against tariff cuts on electric vehicles which could stymie local investments by favoring imports.
In a bid to signal openness in trade, India recently slashed import tariffs on almost 30 items, including luxury motorcycles, and announced a review of surcharges on luxury cars.
