US Seeks Tariff-Free Car Imports in India Amid Tesla’s Market Plans

The United States is pressing India to eliminate tariffs on car imports as part of an upcoming trade agreement, but New Delhi remains hesitant to bring duties down to zero immediately, sources familiar with the discussions told Reuters.

India’s high auto tariffs, which can reach up to 110%, have been a longstanding concern for American car manufacturers, particularly Tesla. CEO Elon Musk has previously criticized India’s import duties as some of the steepest in the world. Although Tesla had put its India entry plans on hold last year, renewed discussions suggest a potential breakthrough.

The issue of auto tariffs will be a focal point in formal negotiations for the trade deal, which have yet to begin, sources indicated. The U.S. has made it clear that it expects India to significantly reduce import duties across most sectors, with an emphasis on automobiles.

A second source noted that India is “listening to the U.S.” and has not outright rejected the proposal. Instead, the government is consulting domestic industries to assess potential impacts before formulating its response.

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Trump Backs Lower Tariffs Amid Trade Ambitions

The tariff debate gained further momentum after former U.S. President Donald Trump criticized India’s high duties in a congressional address, warning of reciprocal action. The trade talks, aimed at resolving tariff disputes and expanding economic ties, seek to push bilateral trade to $500 billion by 2030.

Indian Commerce Minister Piyush Goyal is currently in the U.S. to discuss trade relations and is expected to meet top American officials, including U.S. Trade Representative Jamieson Greer.

India’s Cautious Approach to Tariff Reductions

While India is unlikely to agree to an immediate zero-duty regime, the government has been preparing local automakers for a more competitive landscape. Last month, officials held discussions with domestic car manufacturers to gauge their stance on potential tariff reductions.

India’s automobile industry, producing around four million vehicles annually, has long been shielded by high import barriers. Companies such as Tata Motors and Mahindra & Mahindra have expressed concerns that drastic tariff cuts could discourage investment in local manufacturing and disrupt the emerging electric vehicle (EV) sector.

Despite this resistance, India has signaled a willingness to ease some trade restrictions. Last month, the government reduced tariffs on high-end motorcycles and pledged to review additional surcharges on luxury cars.

With the U.S. pushing for greater market access, all eyes are on how India balances its commitment to domestic industry with its global trade ambitions.