India to Slash EV Import Tariffs Despite Carmakers’ Plea for Delay: Report

India is reportedly preparing to reduce import tariffs on electric vehicles (EVs) in a move that could reshape the automotive landscape. This comes amid growing pressure to finalise a bilateral trade agreement with the United States.

According to a report by Reuters, the Indian government is inclined to prioritise this strategic partnership, even if it means opposing the interests of local carmakers.

Government Pushes for EV Tariff Cuts

As per the report, the central government is planning to slash EV import tariffs significantly—an effort aligned with fostering closer ties with the United States. These changes are anticipated to be part of the first tranche of tariff reductions under a new trade deal. Despite pushback from domestic automakers, officials believe the time has come to open up the sector, which has long been protected.

The report quotes a source stating: “We have protected the auto industry for far too long. We will have to open it up,” indicating a decisive shift in trade and industrial policy.

Domestic Automakers Lobby for Delay

Leading Indian automobile manufacturers such as Tata Motors and Mahindra & Mahindra are lobbying for a delay in the proposed duty cuts. These companies argue that tariff reductions should not come into effect before 2029 and should then be gradually reduced to 30% from current levels, which can be as high as 100%.

Their stance is grounded in significant investments already made in domestic EV manufacturing, supported by government-backed incentive schemes that extend until 2029. Local automakers fear that any premature liberalisation could undermine their competitive advantage and discourage further investment.

Impact on Global and Local Stakeholders

An immediate cut in import duties would be a significant win for Tesla, which has already established showrooms in Mumbai and New Delhi. For Tesla and its vocal supporter, former US President Donald Trump, this development would remove what they have labelled a major barrier to entry in the Indian market.

Indian carmakers worry that a deal with the US could set a precedent for ongoing trade negotiations with other regions such as the European Union and the United Kingdom, further opening the market and intensifying competition.

India’s EV Ambitions and Market Share

EVs currently account for only 2.5% of total passenger vehicle sales in India, which amounted to 4.3 million units in 2024. However, the government has set an ambitious target to raise this figure to 30% by 2030. Achieving such rapid growth will require significant investment, infrastructure development, and consumer adoption.

Domestic automakers argue that any dilution of import duties could derail this progress, especially if the influx of cheaper foreign EVs undermines local players during this formative stage of market development.

Balancing Trade and Industrial Growth

While the Indian government is eager to advance its trade relationship with the United States, it faces a delicate balancing act. On one hand, there is a geopolitical and economic incentive to accommodate foreign interests and attract global investment. On the other, there is a need to protect and promote homegrown industries that have made early commitments to electrification.

Industry insiders suggest that carmakers are willing to accept a phased duty cut on internal combustion engine (ICE) vehicles. However, they seek a more cautious and consultative approach when it comes to electric vehicles, given the long-term investment cycles involved.

Conclusion

India’s potential move to reduce EV import tariffs signals a strategic shift in both trade and industrial policy. While it could accelerate foreign entry and foster global collaboration, it also presents significant risks for domestic automakers who have been early adopters in the EV space. As the government moves forward with trade negotiations, striking a balance between global integration and local industry protection will be key to ensuring sustainable growth in the electric vehicle sector.

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