The United States wants India to eliminate tariffs on car imports. This is under a proposed trade deal between the two nations. However, New Delhi is reluctant to immediately bring down such duties to zero, even as it considers further cuts, according to sources.
India’s high auto tariffs will feature in formal talks for a bilateral trade deal that are yet to begin. One of the three sources, all briefed on the matter, said this paves the way for American electric vehicle maker Tesla, which is gearing up for an India launch.
Taxes on cars imported into India are as high as 110%. Tesla chief Elon Musk has criticized these taxes as being “among the steepest in the world”. The EV giant shelved its plans to enter the world’s third-largest car market for a second time last year.
Musk has found support from U.S. President Donald Trump. Trump has “repeatedly railed against India’s high taxes” and, in an address to Congress on Tuesday, “slammed the country’s auto tariffs of more than 100%, threatening reciprocal action.”
The first source said, “The U.S. ask is for India to bring tariffs down to zero or negligible in most sectors, except agriculture.” He added that the expectation on New Delhi eliminating auto tariffs was “clearer than any other”.
A second source said India was “listening to the U.S.” and had not pushed back. He added it would respond with its position on the tariffs after consulting local industries.
The office of United States Trade Representative, India’s trade ministry, and the foreign affairs ministry did not respond to requests for comment.
$500 BILLION IN TRADE VALUE
After a meeting between Trump and Indian Prime Minister Narendra Modi last month, the two nations agreed to resolve tariff rows. They will work on the first segment of a deal by the fall of 2025. The aim is for bilateral trade worth $500 billion by 2030.
Indian trade minister Piyush Goyal is on a nearly week-long trip to the U.S. On Tuesday, he met U.S. Commerce Secretary Howard Lutnick to pursue trade talks. He is also expected to meet the United States Trade Representative Jamieson Greer.
India is unlikely to relent to U.S. demands to reduce tariffs on auto imports to zero immediately. However, it has been priming the industry to prepare for a lower tariff regime and be open to competition, according to the first source and a fourth person.
Last month, the Indian government met domestic carmakers. The first source added that they wanted “to decide on any tariff cuts and understand their reservations over taxes going down to zero immediately”.
India’s 4 million-vehicles-a-year car market is one of the most protected in the world. Its domestic players have previously argued against lowering tariffs. They say that such a move would dry up investment in local manufacturing by making imports cheaper.
The likes of Tata Motors and Mahindra & Mahindra have especially lobbied against lowering import tariffs on EVs. They argue that it would hurt the nascent sector in which they have invested heavily.
India vowed to avoid protectionist signals on trade. Last month, India cut import tariffs on nearly 30 items including high-end motorcycles. The country also said it will review surcharges on luxury cars.
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