U.S. Pressures India to Cut Car Tariffs as Tesla Eyes Market Entry

The United States is pushing for India to remove or significantly reduce tariffs on car imports as part of a proposed trade deal. However, India is hesitant to eliminate these taxes immediately, though it is open to further reductions, according to sources familiar with the discussions.

High Car Import Taxes Under Scrutiny

India's import taxes on cars can go up to 110%, some of the highest in the world. This issue will be a major topic in upcoming trade talks, especially as Tesla prepares to enter the Indian market.

Tesla CEO Elon Musk has criticized India’s high tariffs, which previously led the company to delay its expansion plans. Now, with the backing of U.S. President Donald Trump—who has repeatedly condemned India's high car taxes—the issue is gaining more attention. Trump has even threatened to impose similar tariffs on Indian exports if changes aren't made.

India’s Response to U.S. Demands

“The U.S. wants India to remove or greatly reduce car import tariffs, except in agriculture,” said one source. Another source noted that India is open to discussions but will consult local carmakers before making a decision.

Neither the U.S. Trade Representative nor India’s trade and foreign affairs ministries have responded to inquiries about the negotiations.

Aiming for $500 Billion in Trade by 2030

Following a recent meeting between President Trump and Indian Prime Minister Narendra Modi, both countries agreed to work on a trade deal by fall 2025. Their goal is to increase trade between the two nations to $500 billion by 2030.

Indian Trade Minister Piyush Goyal is currently in the U.S. for meetings, including talks with U.S. Commerce Secretary Howard Lutnick and United States Trade Representative Jamieson Greer.

Concerns from Indian Car Manufacturers

While India may lower tariffs in the future, immediate changes are unlikely. Domestic carmakers worry that reducing tariffs too much would make imported cars cheaper, discouraging investment in local production.

Last month, Indian officials met with major car manufacturers to discuss their concerns. India’s auto industry, producing over four million vehicles annually, is one of the most protected in the world. Companies like Tata Motors and Mahindra & Mahindra argue that lowering import taxes—especially on electric vehicles—would hurt the growing local EV industry, where they have invested heavily.

India’s Recent Steps to Open Up Trade

Although India remains cautious about car tariffs, it has recently taken steps toward trade liberalization. Last month, the government reduced import taxes on nearly 30 products, including high-end motorcycles, and announced plans to review surcharges on luxury cars. These changes suggest India is open to easing trade barriers while balancing the needs of domestic businesses.

The focus will be on how India and the U.S. find a middle ground that benefits both sides while protecting local industries.

Also Read: Tesla Upcoming Cars in India: Launch Dates and Expected Prices for 2025-2026