India-US Trade Agreement: India’s new trade pact with the US offers tariff relief for luxury cars and Harley-Davidson motorcycles, but electric vehicles (EVs) remain excluded – a setback for Elon Musk’s Tesla, which has lobbied for lower tariffs in the Indian market.
New Delhi will cut tariffs on high-end American cars to 30% from a previously announced 110% as part of an interim trade pact, according to officials quoted by Reuters on February 7. Duties on Harley-Davidson motorcycles will also be waived. But the deal does not make any concessions on electric cars, a move that will effectively affect Tesla, which is already struggling to gain ground in the world’s third-largest passenger vehicle market.
The development comes after US President Donald Trump announced an interim trade deal with India on February 2 after months of negotiations and a phone call with Indian Prime Minister Narendra Modi. A recently announced trade deal drastically reduced tariffs on Indian goods from 50% to 18% in exchange for New Delhi halting purchases of Russian oil.
Electric cars excluded from the agreement
Citing an official, the report said duties on traditional internal combustion cars with an engine capacity above 3,000cc will eventually drop to 30% over the next 10 years. Electric vehicles were left out of the deal, possibly closing the door on a lower tariff for Tesla, the official added.
The move also ignores a key demand from Tesla CEO Elon Musk, who has often criticized New Delhi’s high duties. The exclusion of American electric cars is in stark contrast to the broader access to cars that India has offered to European carmakers after New Delhi signed a deal with the European Union and announced a sharp cut in tariffs of up to 10% on a wide range of vehicles, including gradual concessions on some electric vehicles.
Musk’s Tesla is facing a tough time in India
According to a Bloomberg report published in January 2026, Tesla is trying to offload as much as one-third of the vehicles it imported to India last year. This is because some potential buyers who made early reservations have withdrawn. The company is trying to gain ground in the world’s third-largest car market, and 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, witnessed a tepid debut amid fluctuating global demand. Tesla’s global sales in 2025 fell for the second year in a row, while China’s BYD took the top spot in EVs.
Also read | BYD will overtake Tesla as the world’s largest EV seller in 2025
Dwindling subsidies and increasing competition have shaken Tesla’s share in some markets, including the US, Europe and China. As for Indian buyers, the report suggests that they have yet to fully embrace the brand amid its limited visibility and higher price.
Moreover, potential car buyers step down after a test drive and opt for alternatives that are either comparatively cheaper or loaded with additional features. These include BMW’s iX1 or BYD’s Sealion, both of which are priced lower than the Tesla Model Y in India.
In 2025, Tesla registered only 227 cars in India, the report said, adding that many buyers who had earlier put down initial deposits are now hesitant to complete the purchase.
Also read | Tesla’s sales outlook dims despite Musk’s self-driving euphoria
