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India-US trade deal: India will cut tariffs on high-end US petrol cars to 30% under an interim trade deal, but exclude electric vehicles, hurting Tesla. While Harley-Davidson gets duty relief, Tesla faces weak sales, high prices, and strong competition in India’s EV market.
India-US trade deal: India's new trade pact with the US offers tariff relief for luxury cars and Harley-Davidson bikes, but electric vehicles (EVs) remain excluded - a setback for Elon Musk's Tesla, which has been lobbying for lower duties in the Indian market.
According to officials cited by Reuters on 7 February, New Delhi will slash tariffs on high-end American cars to 30% from the previously announced 110% under the interim trade pact. Duties on Harley-Davidson bikes will also be eliminated. However, the agreement makes no concessions for EVs, a move that will effectively affect Tesla, which is already trying hard to make a mark in the world's third-largest passenger vehicle market.
The development comes after US President Donald Trump, on 2 February, announced an interim trade deal with India, after months of negotiations and a call with Indian Prime Minister Narendra Modi. The recently announced trade deal drastically reduced tariffs on Indian goods from 50% to 18%, in exchange for New Delhi halting the purchases of Russian crude oil.
Electric vehicles excluded from the deal
The report, citing an official, said tariffs on traditional internal-combustion cars with engine capacity over 3,000 cc would eventually drop to 30% over the next 10 years. The electric vehicles have been left out of the deal, possibly shutting a lower-tariff entry door for Tesla, the official added.
The move also ignores a key demand made by Tesla's Chief Executive Officer (CEO), Elon Musk, who has often criticised New Delhi's high duties. The exclusion of American EVs is in stark contrast to the broader auto access that India has offered to the European carmakers, after New Delhi signed a deal with the European Union and announced steep tariff cuts to as low as 10%, across a wide range of vehicles, including gradual concessions on some EVs.
Musk's Tesla faces a tough time in India
According to a Bloomberg report published in January 2026, Tesla has been struggling to offload even one-third of the vehicles it imported in India last year. This is because some prospective buyers who made early bookings backed out. With the company struggling to make a mark in the world's third-largest car market, the Musk-led EV company is now offering discounts of up to ₹200,000 ($2,200) on select variants of the SUV.
Tesla, which entered the Indian market in July 2025, has been witnessing a tepid debut amid faltering global demand. Tesla's worldwide sales in 2025 fell for a second consecutive year, while China's BYD took the top spot in EVs.
Waning subsidies and increasing competition faltered Tesla's share in some markets, including the US, Europe, and China. As far as Indian buyers are concerned, the report suggests they are yet to fully embrace the brand, amid its limited visibility and higher price point.
Further, prospective car buyers back out after a test drive and opt for alternatives that are either comparatively cheaper or are loaded with additional features. This includes BMW's iX1 or BYD's Sealion, both of which have a price point lower than Tesla’s Model Y in India.
In 2025, Tesla registered only 227 cars in India, the report said, and added that many buyers who had previously placed initial deposits were now hesitant to complete the purchase.
English (US) ·