US Demands for Zero Car Tariffs in India Trade Deal as Tesla To Enter Soon
The United States is pressing India to scrap its sky-high car import tariffs as part of a new trade deal, aiming to pave the way for Tesla’s long-awaited entry into the Indian market. Reports from Reuters suggest that while India isn’t ready to drop tariffs to zero right away, it’s open to gradual cuts—a move that could reshape the country’s 4-million-vehicle-a-year auto industry.
India currently slaps tariffs as high as 110% on imported cars, a policy Tesla CEO Elon Musk has slammed as one of the world’s steepest. This barrier stalled Tesla’s plans to enter India twice before, but now, with US President Donald Trump’s backing, the push is stronger. In his Tuesday Congress address, Trump blasted India’s auto tariffs and vowed reciprocal action, hinting at a broader trade showdown.
Sources say the US wants India to slash tariffs to “zero or negligible” across most sectors—except agriculture—with cars as a top priority. After last month’s meeting between Trump and Prime Minister Narendra Modi, both nations agreed to tackle tariff disputes, targeting a $500 billion bilateral trade goal by 2030. Indian Trade Minister Piyush Goyal’s ongoing US visit, including talks with Commerce Secretary Howard Lutnick, underscores the urgency.
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India’s response? It’s listening but cautious. The government plans to consult local giants like Tata Motors and Mahindra & Mahindra, who’ve long opposed tariff cuts. These firms argue cheaper imports would hurt their hefty investments, especially in electric vehicles (EVs). Last month, officials met carmakers to weigh their fears, signaling a slow shift toward competition.
India’s car market is fiercely guarded, but cracks are showing. Recent tariff reductions on 30 items, like high-end motorcycles, and a review of luxury car surcharges hint at openness. Still, dropping auto tariffs to zero could flood the market with foreign EVs, challenging local players.
Tesla’s potential entry looms large. After years of delays, the EV maker is hiring in Mumbai and Pune, eyeing India’s growing 400,000-unit EV market. But with Trump’s April 2 reciprocal tariff threat against India looming, this trade tussle could heat up fast. Will India bend, or hold firm?
