India-US Trade Deal Slashes Tariffs on Luxury Cars, Excludes Tesla

India and the United States are moving closer to finalizing an interim trade agreement that will significantly reduce tariffs on high-end American automobiles while notably excluding electric vehicles, according to a Reuters report published February 7.

Under the framework released Friday, India will slash duties on premium U.S. cars to 30% from as high as 110%, Reuters reports, citing an Indian government official familiar with the discussions. The tariff reductions will apply to traditional internal-combustion vehicles with engine capacity above 3,000 cc and will be phased in gradually over 10 years.

The deal also eliminates tariffs entirely on Harley-Davidson motorcycles and other premium bikes, according to the official, who spoke on condition of anonymity as the pact's details have not been fully disclosed.

Tesla Left Out in the Cold

However, Reuters notes that electric vehicles have been explicitly excluded from the tariff concessions—a decision that effectively blocks a lower-cost entry route for Tesla into the Indian market. The exclusion represents a pointed rebuff to Tesla CEO Elon Musk, who has repeatedly and publicly criticized India's steep import duties on vehicles.

The news agency points out that this approach contrasts sharply with India's trade agreement with the European Union, where New Delhi offered considerably more generous tariff cuts—as low as 10%—across a broader range of vehicles, including eventual concessions on some electric vehicles. The differential treatment suggests India may be using its tariff policy strategically across different trade partnerships.

Protecting Domestic Industry

India, which Reuters identifies as the world's third-largest car market after the United States and China, has long protected its domestic automotive industry through steep import tariffs ranging from 70% to 110%. This protectionist stance has historically made it prohibitively expensive for foreign automakers to import vehicles into the country.

According to the Reuters report, India currently imports relatively few cars from the United States. However, the country does bring in high-end motorcycles such as Harley-Davidsons, making the elimination of duties on these premium bikes particularly significant for American manufacturers.

Broader Trade Context

The tariff agreement is part of a larger trade framework between the two nations. Reuters reports that the development follows President Donald Trump's recent announcement that duties on Indian exports to the United States would be reduced to 18% from 50% in exchange for New Delhi halting purchases of Russian oil.

The tariff cuts are expected to be implemented after both countries sign the formal agreement, which is anticipated in March, according to the official cited by Reuters.

India's trade ministry did not immediately respond to Reuters' request for comment outside usual office hours, the news agency noted.

The interim pact represents a step forward in U.S.-India trade relations, though the exclusion of electric vehicles may continue to be a point of contention, particularly for companies like Tesla that have sought greater access to India's rapidly growing automotive market.