The Center is currently finalizing a policy to increase concessional import duties on EVs, which could significantly help Elon Musk’s Tesla in India.
Tesla’s Impending Entry into Indian Market: Policy Developments
Months after expressing interest in the Indian market, Elon Musk-led Tesla is on the cusp of making its debut in the country. The central government is in the process of finalizing a policy to extend concessional import duties, paving the way for Tesla’s foray into India.
Concessional Import Duty Extension: Boosting Employment and Cutting EV Prices
The government is contemplating extending concessional import duty on electric cars exceeding ₹30 lakh ($36,000) for 2-3 years, as reported by The Economic Times (ET). This strategic move is anticipated to stimulate employment and reduce electric vehicle (EV) prices in the country.
Import Duty Reduction Linked to Manufacturing Plant Construction
According to ET’s sources, the reduction of import duties could be tied to Tesla providing bank guarantees for constructing an EV manufacturing plant in India. This stipulation aims to ensure Tesla’s commitment to investment and development within the Indian market.
Uncertainty Surrounding Vibrant Gujarat 2024 Summit
While Tesla was rumored to announce its entry into the Indian EV market during the Vibrant Gujarat 2024 summit, no final decisions were made regarding the establishment of an electric vehicle plant in the state.
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Import Duty Landscape in India
Under the existing policy, India imposes a 100 percent import duty on cars valued over $40,000 (₹33 lakh) and a 60 percent import duty for cars valued under this amount. Tesla has expressed its willingness to enter the Indian EV market and invest up to $2 billion if the import duty is reduced to 15 percent for the first two years of operations.
Government’s Deliberation on Concessional Import Duties
The government is currently contemplating the reduction of concessional import duties for imported cars, with the final policy hinging on bank guarantees. Importantly, these bank guarantees can be encashed if Tesla fails to comply with the specified timeline for investments.
Market Dynamics and Concerns from Domestic Players
In the current landscape, companies like Mahindra and Mahindra, Tata, and Ola Electric dominate electric vehicle manufacturing in India. Calls for a level playing field have been echoed by these companies, expressing concerns about potential advantages granted to Tesla.
Industry’s Plea for Equity and Domestic Manufacturing Boost
Mahindra & Mahindra, Tata, and Ola Electric have engaged with government officials, emphasizing the necessity for a level playing field. They advocate for increased manufacturing within India. Ola CEO Bhavish Aggarwal has voiced opposition to importing electric cars from foreign players, citing the risk of negatively impacting sales for domestic players if incentives are disproportionately directed towards international firms.
