India-US Trade Deal Sparks Tariff-Free Access for Harley, Leaves Tesla Waiting
India has announced significant changes to its tariffs on high-end American vehicles, particularly benefitting Harley-Davidson motorcycles while leaving Tesla waiting for a breakthrough.
India to Cut Tariffs on High-End U.S. Cars
On February 7, 2023, Indian officials revealed an interim trade agreement that will see tariffs on high-end U.S. cars reduced from as high as 110% to 30%. This substantial cut is expected to take effect over the next decade, gradually rolling down to the lower rate for vehicles with engine capacities exceeding 3,000 cc.
Harley-Davidson Motorcycles Receive Tariff-Free Access
The trade deal includes an elimination of duties on Harley-Davidson bikes, which marks a significant win for the iconic American motorcycle manufacturer. Unlike traditional automobiles, Harley motorcycles will enter the Indian market with no import tariffs, thereby enhancing their competitiveness in this growing market.
Tesla Left Out of Concessions
Electric vehicles, however, were not included in the new tariff reductions. This exclusion is particularly impactful for Tesla, which has faced criticism over India’s high import duties. CEO Elon Musk has been vocal about these challenges in the past, making this absence of concessions a disappointment for the company.
Contrast with EU Trade Agreements
This interim pact contrasts sharply with India’s dealings with the European Union, where it has committed to deeper tariff cuts. In that framework, tariffs could reduce to as low as 10%, covering a broader range of vehicles, including electric models.
The Current Landscape of India’s Auto Market
India ranks as the third-largest car market globally, trailing only the U.S. and China. The nation has historically safeguarded its domestic automotive sector through high import tariffs that range from 70% to 110%. Currently, American imports to India are minimal, although high-end motorcycles like those from Harley-Davidson have been prominent.
- Tariff reduction for U.S. cars: From 110% to 30%
- Elimination of duties: Harley-Davidson bikes
- Electric vehicles: Excluded from tariff cuts
- Implementation date: Expected after agreement signing in March
As the trade pact moves forward, the implementation of these tariff cuts is anticipated to create new opportunities for American automakers, while complicating the entry strategy for electric vehicle manufacturers like Tesla.
