India’s interim trade agreement with the US opens limited access to its automotive market for American automakers while relieving pressure on auto component trade that had begun to weigh on exports.
According to the framework for the interim trade agreement, India will get exemptions “under section 232 on aircraft parts, tariff rate quota on auto parts, leading to tangible export gains in these sectors”.
India has made concessions on high-end vehicles, according to government sources. Import duties on internal combustion engine (ICE) cars with engine capacities above 3,000 cc will be reduced to 30 percent, phased over time. India has also offered zero duty from day one on Harley-Davidson motorcycles in the 800-1,600 cc segment. Other high-end vehicles will see duty reductions, though not elimination. Electric vehicles (EVs) are excluded from the interim agreement to protect the investments made by the domestic industry, sources said, just like in the trade deal with the European Union (EU).
For US automakers, the measures improve access to India’s small but profitable premium segments, long constrained by tariffs that exceed 100 percent. Harley-Davidson exports into India had long been a flashpoint, with US President Donald Trump repeatedly singling out India for imposing what he described as unacceptably high import duties on the iconic American motorcycle brand.
For New Delhi, the exclusions underline a continued effort to shield mass-market vehicles and the budding EV ecosystem from external competition.
However, the more consequential shift lies in the components segment.
The US has committed to providing preferential tariff-rate quotas for automotive parts and to removing certain Section 232 tariffs on select inputs.
“Consistent with US national security requirements, India will receive a preferential tariff rate quota for automotive parts subject to the tariff imposed to eliminate threats to national security found in Proclamation 9888 of May 17, 2019 (Adjusting Imports of Automobiles and Automobile Parts Into the United States), as amended,” reads the India-US joint statement.
Commerce and industry minister Piyush Goyal said some auto component exports will attract zero duty, while others will face an 18 percent tariff. “Around 50 percent of exports will be duty-free,” Goyal said on Saturday.
The framework creates a pathway for broader tariff rationalisation under a proposed Bilateral Trade Agreement.
Indian auto component exports to the US reached $6.2 billion in FY25, accounting for roughly a quarter of the country’s total component exports.
The Automotive Component Manufacturers Association of India (ACMA) said the measures would improve export competitiveness and restore momentum to bilateral supply chains.
“For the Indian auto component industry, the commitment to preferential tariff rate quotas for automotive parts, removal of Section 232 tariffs on select inputs, and a pathway for further tariff rationalisation under the proposed Bilateral Trade Agreement are indeed positive steps,” said ACMA president Vikrampati Singhania who’s also vice chairman & MD of JK Fenner (India).
“These measures will lead to enhanced export competitiveness, deepen technology collaboration, and reinforce India’s role as a trusted partner in resilient global automotive supply chains.”
The clarity comes as a major relief for the components industry that had been feeling the heat of higher tariffs.
US-based automakers had begun deferring new sourcing decisions from Indian suppliers following the tariff increases, ACMA had said last month.
Beyond tariffs, the agreement addresses non-tariff barriers that affect bilateral trade.
The US remains the world’s second-largest automotive market, with annual vehicle sales of about 15 million units, and is India’s most important export destination for auto components. India is the third-largest vehicle market by volume with sales of roughly 4.5 million units in 2025.
