Amid Trump Tariff Threats, India Slashes Import Duties on American Bikes, Cars—A Boost for Harley and Tesla

New Delhi: In a significant move aimed at balancing trade relations, India has announced major cuts in customs duties on high-end motorcycles, luxury cars, and smartphone components in its Union Budget 2025-26. The decision is seen as a potential boost for American giants such as Harley-Davidson, Tesla, and Apple.

The announcement comes amid growing tensions in global trade policies, especially following U.S. President Donald Trump’s sharp criticism of India's import tariffs. However, Indian Finance Minister Nirmala Sitharaman clarified that the decision was part of the country’s broader strategy to enhance domestic manufacturing and was not a direct response to U.S. trade threats.

India’s Custom Duty Overhaul—Key Announcements

As per the new budget, significant reductions in import duties include:

• High-end motorcycles (up to 1,600 cc): Import duties slashed from 50% to 40%.

• Semi-knocked down (SKD) bike kits: Duty reduced from 25% to 20%.

• Completely knocked down (CKD) bike kits: Tax cut from 15% to 10%.

• Luxury cars (above $40,000): Tariff rate cut from 125% to 70%.

• EV lithium-ion batteries: Complete removal of basic customs duties.

Harley-Davidson: Back on the Indian Roads?

For years, Harley-Davidson has faced hurdles in the Indian market due to high import duties. The iconic American brand entered India in 2010 as part of a trade deal, often dubbed the "mangoes for motorcycles" agreement, allowing Indian mango exports to the U.S. in return for eased restrictions on American motorbikes. However, in 2020, Harley-Davidson shut down its direct operations in India due to declining sales and high tariffs.

With India’s latest tax cut, the affordability of Harley motorcycles is set to improve, potentially reviving demand. Hero MotoCorp, Harley's current manufacturing partner in India, has already launched the Harley-Davidson 440X, aiming to capture the premium motorbike segment.

Tesla’s Long-Awaited Entry into India

One of the most notable changes in the budget is the sharp reduction in tariffs for luxury electric vehicles. Tesla, which has long sought to enter the Indian market, has been vocal about the challenges posed by high import duties. The latest move could encourage Tesla to establish local assembly or manufacturing plants, aligning with Prime Minister Narendra Modi’s "Make in India" initiative.

Tesla CEO Elon Musk had planned a visit to India in April 2024 to meet PM Modi, raising speculation of a Tesla investment in the country. However, the visit was postponed due to what Musk described as "pressing Tesla obligations." The new tariff structure may reignite discussions on Tesla’s India entry strategy.

Apple Benefits as India Ramps Up Smartphone Production

In addition to automobiles, the budget has introduced customs duty exemptions on 28 components used in mobile phone battery production. This is expected to further lower manufacturing costs, benefiting Apple, which has been rapidly expanding its production footprint in India.

India has emerged as the second-largest mobile phone manufacturer globally, with Apple capturing a significant 23% share in total revenue in 2024. The import duty cuts are expected to further bolster Apple’s local production while reducing prices for Indian consumers.

A Strategic Move Amid Global Trade Uncertainty

The decision to lower tariffs on American products comes at a time when President Trump has been vocal about imposing "reciprocal tariffs" on Indian goods, citing India as a "tremendous tariff maker." His administration has also hinted at imposing 100% tariffs on products from BRICS nations, including India, if they shift away from using the U.S. dollar.

India’s latest move signals an attempt to ensure smoother trade relations with the U.S. while simultaneously leveraging global supply chain shifts amid the U.S.-China trade war. The tariff cuts could help India attract more foreign investments and solidify its position as a key player in the global market.

Looking Ahead

With Trump’s "America First" trade policy expected to shape global economic trends, India's tariff rationalization appears to be a calculated strategy. Whether the U.S. reciprocates with relaxed duties on Indian goods remains to be seen. However, the move is undoubtedly a step towards making India a more attractive destination for international brands.

As global trade disruptions continue, India’s efforts to strike a balance between self-reliance and economic cooperation will be closely watched by industry leaders and policymakers worldwide.