With Tesla's entry in India, US wants zero tariff on cars in trade deal: Report

The United States wants India to reduce tariffs on car imports as part of a potential trade agreement between the two countries. However, sources familiar with the matter told news agency Reuters that New Delhi is hesitant to completely eliminate these tariffs immediately, although they are open to considering reductions in the future. 

Discussions on India's high auto tariffs will be a key aspect of upcoming bilateral trade negotiations, which have not yet commenced. This could potentially benefit American electric vehicle manufacturer Tesla, which is preparing to launch in India. 

Currently, tariffs on imported cars in India can be as high as 110%, a policy that Tesla CEO Elon Musk has criticized as one of the highest in the world. Due to these high tariffs, Tesla had previously postponed its entry into India, the world's third-largest car market.

 Musk has received backing from President Donald Trump of the United States, who has criticized India's high taxes and auto tariffs exceeding 100%. During a recent address to Congress, Trump threatened to take retaliatory measures against the country's trade policies.

"The US ask is for India to bring tariffs down to zero or negligible in most sectors, except agriculture," a source told Reuters. The source added the expectation on New Delhi eliminating auto tariffs was "clearer than any other".

According to another source, India is carefully considering the concerns raised by the U.S. and has not shown resistance. They plan to communicate their stance on the tariffs after discussing with domestic industries. Requests for comment from the United States Trade Representative, India's trade ministry, and the foreign affairs ministry went unanswered.

US-India Trade deal

Following the February meeting between President Donald Trump and Prime Minister Narendra Modi, both countries have reached an agreement to address tariff disputes and begin working on the groundwork for a trade deal by the fall of 2025. The ultimate goal is to achieve a bilateral trade volume of $500 billion by 2030.

Commerce and Industry Minister Piyush Goyal is currently in the United States for a nearly week-long visit, during which he has already engaged in discussions with US Commerce Secretary Howard Lutnick. He is scheduled to have a meeting with United States Trade Representative Jamieson Greer in the near future.

While India is not likely to immediately eliminate tariffs on auto imports as requested by the US, it is taking steps to ready the industry for a potential decrease in tariffs and increased competition.

India's car market

India's car market, which sees 4 million vehicles sold annually, is highly sheltered compared to other countries. Local industry leaders have resisted calls to reduce tariffs, claiming that doing so would discourage investment in domestic manufacturing by making imported vehicles more competitive, Reuters reported. Companies like Tata Motors and Mahindra & Mahindra have specifically opposed lower import tariffs on electric vehicles, arguing that it would negatively impact the growing sector in which they have made significant investments.