Budget paves the way for India-US Harley diplomacy as customs duty on bigger bikes slashed | India News

NEW DELHI: Ahead of PM Modi’s upcoming visit to the US, the Union Budget may have paved the way for Harley diplomacy between the two countries with Finance Minister Nirmala Sitharaman slashing the import duty on bigger bikes — the move set to directly benefit the iconic American bike company Harley-Davidson — paying heed to an often-repeated tariff reduction rant of President Donald Trump.
The Budget also seemed to offer benefits for Tesla, the electric vehicle giant run by Trump’s confidant Elon Musk, but this relief appears to be more of a lip service with the effective tax rate remaining the same.
On motorcycles, the Budget slashed the customs duty not just for the big bikes with engines above 1600cc, but even the smaller ones, making it a widespread and substantial relief (the move will also benefit other makers such as Honda, Suzuki, Ducati, and KTM).
For the 1600cc and above motorcycles, the customs duty was slashed significantly from 50% to 30% for the fully-built imported bikes. For the ones coming in through semi-knocked down (SKD) kits, the duty comes from 25% to 20%, while for the completely-knocked down (CKD) ones, it comes down from the current 15% to 10%.
For bikes where the engine is smaller than 1600cc, the customs duty comes down from the existing 50% to 40%. On SKDs, it comes down from 25% to 20%, and for CKDs, it gets reduced from 15% to 10%.
The move will see the price of the bigger bikes come down significantly — by at least a few lakh rupees — in a direct benefit to the products that are made in the US (Harley is making smaller-engine bikes in India –about 440cc – in partnership with Hero Moto).
It is believed that the govt decided to slash the import duty to please the new US administration as President Trump has almost been admonishing various countries, especially China, India and Brazil, for being “tremendous tariff makers”. With Trump threatening that “we’re not going to let that happen any longer”, govts across key trading nations have been looking at ways and means to soothe the nerves.
On the other hand, the duty cut for Tesla (and other imported cars) is not tangible in its actual sense.
The Budget cut the headline customs duty on imported cars costing upwards of $40,000 (around Rs 35 lakh) from the current 100%, to 70%, a measure that would seemingly benefit a car company like Tesla that has spoken about having a presence in India, but is yet not ready to invest in a local factory.
However, while reducing the basic customs duty by 30%, the budget replaced the Social Welfare Surcharge of 10% on the previous customs duty with a 40% Agriculture Infrastructure and Development Cess (AIDC).
In effect, the cumulative duty on any new car – priced above $40,000 — that is being imported to India continues to be 110%.
So in effect, there is no effective change in duty on the ground in case Musk decides to begin his electric car business in India through the import route.
Govt had already welcomed the maverick American businessman with a special electric vehicles manufacturing policy, that many saw as a ‘Tesla package’. The package, which was announced around March last year, promised any company investing over $500 million for a factory with a highly-subsidised 15% import duty for around 8,000 cars annually as they began work for a manufacturing base. However, while the govt waited anxiously, Musk backed out at the last minute, in a big setback to the plans.
Will the new lower headline tariffs help India in negotiating better with the US during the trade talks, only time will tell.