The United States is advocating for India to eliminate tariffs on car imports as part of a proposed trade agreement, aiming to facilitate Tesla's entry into the Indian market, according to trade discussions between the two countries, Reuters said in a report Thursday.

Among the highest in the world, India now taxes imported cars at rates ranging from 110%. For international manufacturers, particularly Tesla (TSLA, Financials), which has long wanted entry to the Indian market, the exorbitant levies have been a big obstacle. While previous US President Donald Trump has denounced the tariffs and cautioned of possible retaliatory action, Tesla CEO Elon Musk has consistently attacked them.

India has shown a readiness to cut vehicle taxes, but it is doubtful that it would reduce them down right away to zero. About possible cuts, the Indian government is engaging local automakers. Local manufacturers like Mahindra & Mahindra and Tata Motors (TTM, Financials) have resisted major tariff reduction, claiming that an inflow of less expensive imports will endanger home industry and investment.

With both parties hoping to settle tariff concerns and start the first phase of a larger trade pact by the autumn of 2025, the US and India are in continuous trade discussions.

Currently in the US negotiating with US Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer is India's Commerce and Industry Minister Piyush Goyal. His visit marks a further departure from protectionist measures as India progressively releases import limits on luxury cars and high-end motorbikes, thereby easing import limitations.

Due to the hefty tariffs, Tesla had shelved its aspirations for growth in India; however, now under changing trade negotiations, it is reevaluating its approach. Though India is wary about changing its auto industry rules quickly, the continuous conversations show a more general attempt to improve US-India commercial relations.