US eyes zero tariff on cars in India trade deal as Tesla entry nears: Report

New Delhi: The United States wants India to eliminate tariffs on car imports under a proposed trade deal between the two nations, but New Delhi is reluctant to immediately bring down such duties to zero even as it considers further cuts, sources told Reuters.

India's high auto tariffs will feature in formal talks for a bilateral trade deal that are yet to begin, said one of the three sources, all of whom were briefed on the matter, paving 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 per cent, which Tesla chief Elon Musk has criticised as being among the steepest in the world. The EV giant last year shelved its plans to enter the world's third-largest car market for a second time.

Musk has now found support from US President Donald Trump, who 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 per cent, threatening reciprocal action.

"The US ask is for India to bring tariffs down to zero or negligible in most sectors, except agriculture," the first source said, adding the expectation on New Delhi eliminating auto tariffs was "clearer than any other".

A second source said India was "listening to the US" and had not pushed back, adding 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.

Trade worth $500 billion

After a meeting between Trump and Indian Prime Minister Narendra Modi last month, the two nations agreed to resolve tariff rows and work on the first segment of a deal by the fall of 2025, aiming for bilateral trade worth $500 billion by 2030.

Indian trade minister Piyush Goyal is on a nearly week-long trip to the US and on Tuesday met US Commerce Secretary Howard Lutnick to pursue trade talks. He is also expected to meet the United States Trade Representative Jamieson Greer.

While India is unlikely to relent to US demands to reduce tariffs on auto imports to zero immediately, it has been priming the industry to prepare for a lower tariff regime and be open to competition, said the first source and a fourth person.

Last month, the Indian government met domestic carmakers to decide on any tariff cuts and understand their reservations over taxes going down to zero immediately, the first source added.

India's 4 million-vehicles-a-year car market is one of the most protected in the world and its domestic players have previously argued against lowering tariffs, saying 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, saying it would hurt the nascent sector in which they have invested heavily.

Vowing to avoid protectionist signals on trade, India last month cut import tariffs on nearly 30 items including high-end motorcycles and said it will review surcharges on luxury cars.