“Even with a 15% duty, or even a 0% duty, the average price of a Tesla would be around ₹35 lakh,” Malhotra stated, highlighting the stark contrast with the Indian market where “95% of the market is below ₹30 lakh”. He further emphasised the burgeoning competition within the electric vehicle (EV) segment, with established players like Tata Motors, MG Motor, Maruti, Mahindra, and Hyundai already offering or preparing to launch models in the more affordable range.
Malhotra also dismissed the relevance of US President Donald Trump’s demand for zero tariffs on American automobiles, arguing that the US is not a major exporter of cars to India. “The main exporters to India are Korea, Japan, and Thailand. The US neither exports cars to India significantly nor imports them from India. So, reciprocal tariffs in this sector are irrelevant,” he explained.
While Trump’s push for tariff-free access for Tesla and Harley-Davidson motorcycles aligns with Elon Musk’s interests, Malhotra pointed out that India has already reduced auto tariffs from 110% to 70% and introduced a separate policy for EV imports. However, a complete removal of tariffs remains impractical for conventional vehicles.
Meanwhile, former Secretary of Commerce Ajay Dua raised concerns about the reliability of any trade agreement with the US, citing President Trump’s history of policy reversals. “We must examine the United States’ track record concerning trade agreements. Trump himself renegotiated NAFTA in 2017-18 but is now criticising it and imposing higher duties on Mexico and Canada. If we finalise a bilateral deal, can we fully rely on it if circumstances change as Trump and his cohorts perceive?” Dua questioned.
Edited Excerpt from the Interview:
Q: When it comes to trade talks, the trade discussions and the bilateral trade agreement have formally begun this week. The US seems to want zero-for-zero tariffs on all sectors except for agriculture. Do you think this is doable?
Dua: Yes, in some ways, it is doable because, for us, imports from the US are currently far lower than our exports. But the question is, is it desirable? First, we have an MFN (Most Favoured Nation) agreement that must be extended to all the countries engaged in trade with us. If we offer someone else a better rate than what we offer others, they can demand that under the MFN agreement. So that would have to be rescinded altogether. And that’s a very old agreement, previously honoured by GATT and now by the WTO.
Apart from that, we must examine the United States’ track record concerning trade agreements. If you recall, in 1994, the NAFTA agreement—the North American Free Trade Agreement—was signed between Canada, the US, Mexico, and smaller countries of North America. President Trump, in 2017-18, replaced it with a trilateral agreement between Canada, Mexico, and the US. And now, after having negotiated it himself in 2017-18, he is complaining that those countries charge duties much higher than what the US charges them. He refers to it as twice or something like that. The fact of the matter is, Trump negotiated it himself. And now, suddenly, he finds no merit in that agreement. So, he is blatantly saying that the US is walking out of it, and the US has already announced higher duties—by 25% —on both Mexico and Canada.
I am not so optimistic that even if the bilateral agreement, on which work has just started yesterday or this morning, is negotiated, we can fully rely upon it if the circumstances change, as President Trump and his cohort in the United States perceive.
Q: The sense we are getting is that the US government is unlikely to issue any carve-outs for India from the reciprocal tariffs that will take effect on April 2. According to a report by Morgan Stanley, a 10% increase in US tariffs on Indian goods may squeeze GDP growth by 30 basis points. What do you think will be the larger impact of these reciprocal tariffs, and what is the possibility of averting them before April 2nd? Will we have to give some guarantees to the US administration?
Dua: Trump told the joint Congress yesterday that he is against any carve-outs for any of these nations—seven of them, including Brazil and India. He claims that these countries have been levying huge duties. He has discussed the trade differential between them and expressed that he does not believe in the WTO. The US released a full paper on March 3 outlining its trade policy with the rest of the world, which criticises the WTO as one of the most ineffective instruments. It states that instead of moving toward zero tariffs and free trade by granting carve-outs, developing nations or countries that still call themselves developing—even though they have surpassed the per capita income classification of the World Bank—should not be given such benefits.
So, how much credibility can we attach to any measures we take? We made certain concessions just before our Prime Minister met Trump, yet he criticises us. He repeatedly refers to India as a high-tariff jurisdiction.
Q: Let me begin by asking you about Tesla and what Sajjan Jindal told CNBC-TV18. He said that he is not afraid of Tesla entering the Indian car market and that this is not a market where Tesla can be successful. He may be successful in America, but India is very complex. Would you agree with Sajjan Jindal?
Malhotra: These are chaotic and challenging times. If you analyse the market, as mentioned in a report, even with a 15% duty or even a 0% duty, the average price of a Tesla would be around ₹35 lakh — 95% of the market is below ₹30 lakh.
Today, Tata Motors has five models, MG has three models, and Maruti, Mahindra, and Hyundai are launching their own EVs. So, you already have eight to nine products in the below ₹30-lakh price segment. The higher segment constitutes only about 7% to 8% of the market. In that segment, companies like BMW and Audi are also present, and BMW has just launched a new product.
Tesla’s dominance in the EV industry, which was significant three years ago, is not the same today. Tesla is now just another player in the market. To that extent, in principle, I agree with what Sajjan Jindal mentioned. Considering the challenges of the Indian auto industry, the features consumers prioritise, and their value preferences, it will not be easy for Tesla. So, its volumes will be limited. I don’t think the market will be impacted to a large extent. There will be more competition at the higher end, but other companies can handle it. However, in the mass market—which comprises 95% of the EV segment below ₹30 lakh—there is already significant competition from existing players.
Q: But when it comes to zero tariffs, this is what Donald Trump demands, saying that you cannot charge 110% tariffs. The fact is, India has already brought down tariffs to 70% on cars costing above $40,000. Even if the duties are reduced to 0%, how will this impact the Indian car industry?
Malhotra: First, the US is not a major exporter of cars to India. The volumes are minimal. The main exporting countries are Korea, Japan, and, to some extent, Thailand. The Indian auto industry has developed significantly. Today, for cars priced below ₹30 lakh, we are largely self-sufficient and do not need excessively high import duties to protect our market. For premium vehicles, there is room for tariff reductions, but reducing them to zero is impractical.
As far as auto trade is concerned, the US neither exports cars to India in significant numbers nor imports them from India. So, reciprocal tariffs in this sector are irrelevant. Most of India’s car exports go to other countries, not the US. We have already reduced tariffs from 110% to 70%, and with EVs, the government has proposed a different rule for a temporary period. However, zero tariffs are not a viable solution for conventional vehicles. Trump seems to echo Elon Musk’s demand for lower EV tariffs. However, India is already prepared to offer reduced tariffs for EVs.
Watch the accompanying video for the entire discussion.
