U.S. Urges India to Drop Car Tariffs as Tesla Plans Entry

NEW DELHI — The United States is pressing India to eliminate car import tariffs as part of a new trade deal, sources said on March 5, 2025. This push comes as Tesla, the American electric vehicle giant, prepares to enter India’s massive car market. The move aims to ease trade barriers and boost U.S. car sales in the world’s third-largest auto market.

Trade Talks Heat Up

India slaps tariffs as high as 110% on imported cars. Tesla CEO Elon Musk has called these fees some of the steepest globally. The high costs have stalled Tesla’s plans to sell in India before. Now, with U.S. support, the company sees a fresh chance. Sources say the U.S. wants tariffs cut to zero or near-zero in most sectors, except farming. India is listening but hasn’t agreed yet.

The timing aligns with Tesla’s renewed push into India. Last year, the company paused its entry plans for the second time. Musk has since found a key ally in U.S. President Donald Trump. On Tuesday, Trump slammed India’s tariffs in a speech to Congress. He threatened matching tariffs on Indian goods if no deal is reached. This pressure has sparked talks between the two nations, with formal trade negotiations expected soon.

India’s Car Market at Stake

India’s auto market is huge, with 4 million vehicles sold yearly. It’s also heavily guarded. Local firms like Tata Motors and Mahindra & Mahindra fight hard to keep tariffs high. They say lower duties would hurt homegrown manufacturing. Cheap imports could dry up investments, they argue. Electric vehicles (EVs) are a big worry. These companies have poured cash into India’s young EV sector.

Still, India shows signs of bending. Last month, the government met with carmakers to discuss tariff cuts. Sources say officials want the industry ready for competition. India also trimmed duties on 30 items, like fancy motorcycles, in February. Luxury car surcharges are under review too. These steps hint at a softer stance, even if zero tariffs aren’t coming fast.

“The U.S. is clear: drop auto tariffs,” said a source close to the talks. “India hasn’t pushed back, but they’re checking with local players first.” Indian Trade Minister Piyush Goyal is in the U.S. this week. He met U.S. Commerce Secretary Howard Lutnick on Tuesday. Goyal will also see U.S. Trade Representative Jamieson Greer. These meetings could shape the next moves.

Tesla’s Big Bet

Tesla’s entry is a game-changer. Musk has long eyed India’s growing EV demand. Lower tariffs would let Tesla sell cars there cheaper. The company already picked spots for showrooms in New Delhi and Mumbai. But India has rules. A 2024 policy offers tariff cuts to firms investing $500 million in local plants. Tesla might need to build, not just sell, to win big.

Trump and Indian Prime Minister Narendra Modi met last month. They vowed to fix tariff fights and aim for $500 billion in trade by 2030. This deal could be step one. Yet, India’s carmakers won’t give up easy. They fear Tesla’s edge could squeeze them out. The talks will test how far India bends to please its U.S. partner.

What’s Next?

This trade push could reshape India’s auto scene. If tariffs drop, U.S. brands like Tesla could flood in. That might spark price wars and more EV options for buyers. But it’s not a done deal. India must weigh jobs and growth against U.S. demands. Talks are just starting, and both sides face tough choices.

A zero-tariff deal could boost trade ties. It might also pull more American firms to India. For Tesla, success here could mean billions in sales. Still, India’s response is key. After meeting local carmakers, New Delhi will decide its stance. The world’s watching as these giants negotiate.