India’s Narendra Modi government is likely to shun its years-long protectionist approach and slash its steep tariffs on imported electric vehicles, as it races to reach a trade deal with US President Donald Trump.
The decision — reported by government and industry sources to Reuters — would be in defiance of requests to delay such levies, made by local automakers, who have for long lobbied against a reduction of EV import tariffs.
“We have protected the auto industry for far too long. We will have to open it up,” one government official told Reuters, adding that the plan was to lower tariffs “significantly”.
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The officials declined to disclose the size of the planned duty cut, however, given ongoing negotiations with Washington.
Pushback from the domestic auto lobby has been a key reason why the Indian government has, for months, delayed a reduction of import levies.
That delay has kept foreign EV-makers — especially Elon Musk-led Tesla — at bay from India, despite showing interest in entering the market for several years. India currently charges levies as high as roughly 100% on imported EVs.
This time around, however, New Delhi is serious about lowering EV tariffs, sources told Reuters. The sector is set to be part of the first tranche of tariff reductions in a planned bilateral trade deal with the US.
Reaching the deal would be crucial for Delhi, with Trump set to unveil his ‘liberation day’ reciprocal tariffs later on Wednesday.
Trump has been a harsh critic of India’s sky-high import levies, referring to the country as a “tariff king”.
New Delhi is, as a result, likely to be significantly vulnerable to Trump’s reciprocal taxes. It is considering slashing import levies on $23 billion worth of US imports to ‘save’ its exports.
Lobby wants delay
Local Indian automakers are lobbying the Modi Administration to delay any cut in EV tariffs until 2029, and then phase in a reduction to 30%.
An immediate cut would be a setback for domestic players like Tata Motors and Mahindra & Mahindra, which have invested millions of dollars in local EV manufacturing, with more to come.
It would, however, be a victory for Tesla, which has finalised showrooms in Mumbai and New Delhi to begin selling imported cars in the South Asian nation this year. Trump has said it is currently “impossible” for Tesla to sell in India and that it would be unfair if it had to build a factory there.
Indian automakers fear any agreement with the US would set a precedent for ongoing trade talks with the European Union and Britain, intensifying competition in India’s small but fast-growing EV sector.
Carmakers are open to some immediate duty cut on gasoline models, followed by a phased reduction to 30%, but say their EV investment is tied to New Delhi’s incentive programme for local manufacturing that runs until 2029, sources told Reuters. Allowing cheaper imports before then would hurt their competitiveness, Indian carmakers say.
Tata Motors currently dominates India’s EV sales, which accounted for just 2.5% of the country’s total 4.3 million car sales in 2024.
The Modi government is looking to increase the share of EVs to 30% by 2030.
- Reuters, with additional editing by Vishakha Saxena
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