India is preparing to reduce import tariffs on electric vehicles (EVs), rejecting appeals from domestic automakers to postpone such cuts by four years, as New Delhi prioritises finalising a trade agreement with the United States, according to government and industry sources cited by Reuters.

Automakers have been lobbying the government of Prime Minister Narendra Modi to delay any tariff reductions until 2029. They have proposed a gradual reduction to 30%, down from current levels of up to approximately 100%, according to two industry sources and one government official.

However, New Delhi is committed to reducing EV tariffs - an issue that has previously drawn criticism from U.S. President Donald Trump and Tesla Chief Executive Officer Elon Musk. According to government officials, the EV sector is expected to be included in the initial phase of tariff reductions under the proposed bilateral trade agreement.

"We have protected the auto industry for far too long. We will have to open it up," stated a second government official, who added that the plan involves a significant reduction in tariffs, including those applicable to EVs.

Officials have declined to disclose the exact scale of the planned duty cuts, citing the ongoing nature of negotiations with Washington.

The sources, who are familiar with the discussions and the automotive sector's demands, requested anonymity as they are not authorised to speak publicly.

Neither the Ministry of Commerce nor the Society of Indian Automobile Manufacturers (SIAM), which represents car manufacturers in the world's third-largest automotive market, responded immediately to email enquiries seeking comment.

New Delhi's intention to reduce duties on EVs and other goods is seen as part of a broader strategy to strengthen ties with President Trump, who has previously described India as a "tariff king." His administration is also expected to announce reciprocal tariffs on several trading partners later on Wednesday.

An immediate reduction in duties would represent a victory for Tesla, which has secured showroom locations in Mumbai and New Delhi in preparation for launching imported models in India this year. President Trump has stated that it is currently "impossible" for Tesla to sell in India and has argued that it would be unfair to require the company to establish a manufacturing facility there.

However, such a move would be a setback for domestic manufacturers such as Tata Motors and Mahindra & Mahindra, both of which have invested substantial sums in EV production within India. These firms have strongly opposed any early reductions in import duties.

According to three sources, automakers fear that any agreement with the United States could establish a precedent for trade negotiations with the European Union and the United Kingdom, thereby increasing competitive pressure within India's nascent but rapidly expanding EV sector.

In 2024, EVs accounted for only 2.5% of total car sales in India, which stood at 4.3 million units. The government aims to raise this figure to 30% by 2030.

While some carmakers are amenable to immediate duty reductions on petrol-powered models, followed by a phased reduction to 30%, they argue that their EV investments are tied to the government's incentive programme for local manufacturing, which runs until 2029. Allowing lower-cost imports before this date, they contend, would undermine their competitiveness.

"They are not so rigid on ICE (internal combustion engine) vehicles but have sought careful consideration for EV duties given early investment commitments," stated the first government official.