India is poised to slash import tariffs on electric vehicles (EVs), overriding opposition from domestic automakers who have sought a phased reduction until 2029. The move underscores New Delhi’s commitment to securing a trade pact with the United States, despite concerns from homegrown manufacturers that cheaper imports could disrupt the country’s nascent EV market.
According to senior government officials and industry sources familiar with the discussions, the tariff cuts will be significant and implemented swiftly, marking a major policy shift aimed at fostering international trade relations while accelerating EV adoption in India. For years, India’s auto industry has been shielded by steep import duties, reaching nearly 100% on fully assembled EVs. Domestic manufacturers, including Tata Motors and Mahindra & Mahindra, have urged the government to uphold protectionist measures, citing their heavy investments in local EV production. However, policymakers in New Delhi believe that reducing these barriers is essential for attracting global players like Tesla, which has been lobbying for lower duties to enter the Indian market. With Tesla finalising plans to establish showrooms in Mumbai and New Delhi, a tariff reduction would pave the way for its entry, potentially intensifying competition in an industry still in its infancy.
The EV sector in India remains at a developmental stage, with electric models accounting for a mere 2.5% of total car sales in 2024. The government, however, aims to increase this figure to 30% by 2030, an ambitious target that necessitates a broader range of affordable and technologically advanced vehicles. While some domestic automakers have expressed openness to lowering tariffs on internal combustion engine vehicles, they argue that cutting duties on EVs prematurely could undermine their market positioning. Their investment strategies are closely tied to state-backed incentives designed to boost local manufacturing, and they fear that an influx of foreign imports could erode their competitive edge before these programmes reach full fruition.
The decision to push ahead with duty reductions is also driven by diplomatic considerations. Former U.S. President Donald Trump has long criticised India’s tariff policies, branding the country as a ‘tariff king.’ With Washington preparing to impose reciprocal duties on trading partners, New Delhi’s willingness to lower EV tariffs could serve as a goodwill gesture, strengthening bilateral economic ties. However, concerns persist that any concessions to the U.S. may set a precedent for ongoing negotiations with the European Union and the United Kingdom, further opening India’s auto market to international competition. While the policy shift could benefit consumers by making EVs more accessible, it raises questions about the long-term impact on domestic manufacturers and their ability to scale operations in a rapidly evolving landscape.
