India-US trade deal to cut duties on luxury cars, EVs excluded

India and the United States of America are close to finalising an interim trade agreement that will likely reduce import duties on high-end American automobiles, according to a Reuters report. Electric vehicles, however, are excluded from the scope of concessions.

Under the proposed framework, import duties on premium US-made internal-combustion cars will be cut to 30 percent – currently, it's as high as 110 percent. The reductions will apply only to internal combustion engine vehicles with engine capacities above 3,000cc and will be phased in over a 10-year period.

1. Concessions apply only to ICE vehicles above 3,000cc
2. Electric vehicles are outside the scope of concessions
3. Zero duty access confirmed for US-made motorcycles

EVs kept out of tariff relief

Electric vehicles have deliberately been left out of the agreement. This effectively rules out a lower-duty import route for Tesla, which has repeatedly flagged India’s high import taxes as a key hurdle to market entry.

This contrasts with India’s trade agreement with the European Union, where tariff rates are as low as 10 percent across a wider range of vehicles, including eventual concessions on some electric vehicles. The differing treatment indicates that India is applying its tariff policy selectively across trade partners.

US-made motorcycles to get zero import duty

According to a Reuters report, India is likely to eliminate import duties on US-made motorcycles, a move that would primarily benefit brands such as Harley-Davidson.

It is worth noting, however, that Harley-Davidson’s India-bound models are currently sourced from Thailand, not the United States, and therefore would not benefit from the India-US free trade agreement . Any price impact would depend on whether the brand chooses to realign its production or sourcing strategy and import select models directly from the US in the future.

Protecting the domestic auto industry

India, identified by Reuters as the world’s third-largest car market after the USA and China, has long protected its domestic car industry through high import duties, which currently range from 70 percent to 110 percent. These tariffs have made fully imported vehicles expensive and pushed global manufacturers towards local assembly instead of direct imports.

The proposed tariff changes are part of a broader trade negotiation between India and the USA, and are expected to be formalised in March. The actual impact on vehicle prices and import volumes will depend on how the reductions are phased in and whether any caps or conditions are applied.

For now, the concessions are limited to ICE cars and motorcycles, with electric vehicles remaining outside the scope of the agreement.