India and the United States are close to finalizing an interim trade agreement that will significantly reduce import tariffs on high-end American automobiles, while excluding electric vehicles from the concessions, according to reports.
Under the proposed framework, India will lower duties on premium U.S. cars to 30% from levels as high as 110%, Reuters reported, citing an Indian government official familiar with the negotiations. The reduced tariffs will apply to internal-combustion engine vehicles with engine capacity exceeding 3,000 cc and will be phased in over a 10-year period.
The agreement will also eliminate import duties on Harley-Davidson motorcycles and other premium bikes, the official said, speaking on condition of anonymity as the details of the pact have not yet been formally disclosed.
However, electric vehicles have been explicitly excluded from the tariff cuts. Report noted that the move effectively blocks a lower-cost entry for U.S. electric carmaker Tesla into the Indian market, a long-standing demand of Tesla CEO Elon Musk, who has repeatedly criticized India’s high vehicle import duties.
The report highlighted that the approach differs from India’s negotiations with the European Union, where New Delhi has offered deeper tariff reductions—down to 10%—across a wider range of vehicles, including potential concessions on electric vehicles. The contrast suggests India is using tariff policy selectively across trade partnerships.
Protecting domestic industry
India, the world’s third-largest car market after the United States and China, has historically protected its domestic automotive sector through import duties ranging from 70% to 110%. As a result, relatively few cars are imported from the U.S., though India does import premium motorcycles such as Harley-Davidsons, making the elimination of tariffs on these products significant for American manufacturers.
Broader trade framework
The tariff concessions are part of a broader trade arrangement between the two countries. Reuters reported that the development follows U.S. President Donald Trump’s announcement that duties on Indian exports to the United States would be reduced to 18% from 50%, in exchange for India halting purchases of Russian oil.
The tariff reductions are expected to take effect after the formal signing of the agreement, which is anticipated in March. India’s trade ministry did not immediately respond to Reuters’ request for comment outside regular office hours.
While the interim pact marks progress in U.S.–India trade relations, the exclusion of electric vehicles is likely to remain a key point of contention, particularly for automakers seeking access to India’s fast-growing automotive market.
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