India Contemplates Five-Year Tax Cut On EV Imports To Attract Tesla

The Indian government is considering the possibility of implementing tax reductions on imported fully assembled electric vehicles (EVs) for a duration of up to five years. This strategic move aims to attract companies such as Tesla to not only sell but also potentially manufacture its electric cars within the country.

The government is formulating an EV policy designed to enable global car manufacturers to import electric vehicles at reduced duty rates, provided they commit to eventually manufacture EVs in India, Bloomberg reported.

However, a final decision on the policy’s outline is yet to be made.

In 2021, Tesla sought a reduction in import duties for its EVs. Tesla was seeking to lower the rates from the existing 70%-100% range to 40%, depending on the import value of its vehicles.

Tesla CEO Elon Musk is expected to meet with Commerce and Industry Minister Piyush Goyal later this week to have discussions about the company’s plans to establish a factory in India. Goyal is currently in San Francisco for ministerial engagements related to the Indo-Pacific Economic Framework and the Asia-Pacific Economic Cooperation.

Tesla is actively pursuing entry into the Indian market, one of the most promising automotive markets globally, driven by the increasing demand for EVs among India’s expanding middle class.

On the other hand, Tesla’s potential investment holds the promise of supporting the government’s agenda to boost manufacturing’s contribution to India’s GDP and simultaneously generate employment opportunities.

Tesla plans to source components worth $1.7 Bn to $1.9 Bn this year from local vendors after buying $1 Bn worth of components last year, Goyal said earlier.

“…Tesla already last year bought $1 Bn of components from all of you sitting here. I have a list of companies who supplied to Tesla. This year their target is nearly $ 1.7 bn or $ 1.9 bn…,” said Minister Goyal.

It was reported earlier that the Indian government is working to expedite approvals for Tesla’s potential entry into the country, with a goal of providing all the necessary clearances by January 2024.

A recent meeting conducted by the Prime Minister’s Office reviewed the upcoming phase of EV manufacturing in India, which includes Tesla’s investment proposal.

India’s growing demand for EVs has garnered interest from both international and local tech firms, as well as emerging startups. Acer, the Taiwanese tech giant, has recently made its foray into the Indian EV market by licensing its brand to eBikeGo, a mobility startup.

Meanwhile, VinFast disclosed intentions to invest between $150 Mn and $200 Mn in India, aiming to establish a completely knocked-down (CKD) assembly unit in the country.

Alongside Tesla, automotive giants such as Audi and Mercedes-Benz are also eagerly positioning themselves to seize opportunities within the burgeoning Indian EV ecosystem.

Overall, total EV registrations in India across categories grew to 1.32 Lakh units in October from 1.28 Lakh units in September. As of now, a total of 12,27,195 EVs have been registered in India in 2023.