Local EV OEMs in danger? India cuts EV tariff rate for trade deal with Trump: Reuters

In a new set of moves to establish a trade deal with the United States, India has decided to reduce its tariff on electric cars. The update came as a blow to the local automakers who had previously requested the government to delay any tariff reduction until 2029, Reuters reported. 

According to the report, the automakers have submitted a request to phase out the tariff by reducing it to 30% from 100% after 2029.

The EV sector is expected to be included in the first round of tariff reductions in a planned bilateral trade agreement. India is serious about reducing EV taxes, which earlier have been reported to be a cause of concern for the US President Donald Trump and his supporter, Tesla CEO Elon Musk, according to Reuters.

Citing a government official source, Reuters reported, "We have protected the auto industry for far too long. We will have to open it up."

However, the magnitude of the tariff reduction has not been confirmed yet as the negotiations with Washington are still going on.

As Trump, who has called India a "tariff king," gets ready to impose reciprocal tariffs on trading partners later on Wednesday, New Delhi is attempting to mend fences with him by reducing taxes on EVs and other commodities.

Trump has stated that it is currently "impossible" for Tesla to sell in India and that it would be unfair if it had to build a factory there. Tesla has finalized showrooms in Mumbai and New Delhi to start selling imported cars in the South Asian country this year, so an immediate cut would be a victory for the company.

However, the update may act like a setback for the Indian domestic players like Mahindra & Mahindra and Tata Motors.

In addition, the local automanufacturers also fear that a lower tariff deal with the USA might set a precedent for future trade negotiations with Britain and the EU, escalating competition in India's small but rapidly expanding EV market.

Although automakers are open to a partial duty reduction to 30% on gasoline models, they claim that allowing cheaper imports before 2029 would hurt their competitiveness because their EV investment is linked to New Delhi's local manufacturing incentive program, the report by Reuters added.