The United States wants India to remove auto import tariffs under a proposed trade deal between the two countries, sources told Reuters, but New Delhi is unwilling to immediately cut such duties to zero even as it considers further cuts.
India’s high auto tariffs will form part of formal talks on a bilateral trade deal that have yet to begin, one of three sources said, paving the way for U.S. electric carmaker Tesla as it prepares to launch products in India.
India’s tax rate on imported cars is as high as 110%, which Tesla CEO Elon Musk criticized as one of the highest in the world. The electric car giant last year shelved plans for a second entry into the world’s third-largest auto market.
Musk now has the backing of US President Donald Trump, who has repeatedly decried India’s high taxes and in a speech to Congress on Tuesday lashed out at the country’s over 100% auto tariffs and threatened reciprocal action.
“The United States has asked India to reduce tariffs to zero or negligible in most sectors except agriculture,” the first source said, adding that the expectation for New Delhi to remove tariffs on automobiles was “more clear than on any other sector.”
Another source said India was “listening to the US” and was not pushing back, adding that India would respond on its tariff stance after consulting local industry.
The Office of the U.S. Trade Representative, India’s Trade Ministry and the Ministry of External Affairs did not respond to requests for comment.
Trade volume US$500 billion
After Trump and Indian Prime Minister Narendra Modi met last month, the two countries agreed to resolve the tariff dispute and formulate the first part of the agreement by the autumn of 2025, aiming to reach $500 billion (approximately 43,526,170 million rupees) in bilateral trade by 2030.
Indian Trade Minister Piyush Goyal is on a nearly week-long trip to the United States and met U.S. Commerce Secretary Howard Lutnick on Tuesday to pursue trade talks. He is also expected to meet with U.S. Trade Representative Jamieson Greer.
While India is unlikely to comply with U.S. demands for an immediate reduction in auto import tariffs to zero, it has been pushing the industry to prepare for a lower tariff regime and open up competition, the first and fourth sources said.
The first source added that the Indian government met with domestic automakers last month to decide on the tariff cuts and to understand their reservations about immediately cutting taxes to zero.
Domestic companies in India’s 4 million-car-a-year car market, one of the most protected in the world, had previously opposed lower tariffs, saying the move would make imports cheaper, drying up investment in local manufacturing.
Companies such as Tata Motors and Mahindra & Mahindra in particular have lobbied against lower import duties on electric vehicles, saying it would hurt the nascent industry in which they have invested heavily.
India has vowed to avoid protectionist signals, last month lowering import duties on nearly 30 items including high-end motorcycles and saying it would review surcharges on luxury cars.
© Thomson Reuters 2025
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