Tata Motors Opposes Tax Cut On EV Import Amid Tesla’s India Foray Plans

Tata Motors is reportedly urging Indian officials not to lower import taxes of 100% on electric vehicles (EVs) and to protect the domestic industry and investors, as the government evaluates Elon Musk-led US electric car maker Tesla’s plan to foray into the market.

While India is trying to boost domestic manufacturing and EV adoption, Tesla is looking to make a $2 Bn investment in India for setting up a local factory in the country, only if the government cuts import taxes on its EVs to as low as 15% during the first two years. 

During discussions with Prime Minister Narendra Modi’s office and other departments, Tata has opposed the proposal, arguing that its investors made decisions based on the assumption that the existing tax regime, favouring local entities, would remain unchanged, Reuters reported.

Tata is making the case that India’s EV industry requires additional government support during its early growth stages. The company highlights the contrast with imported gasoline or diesel cars, which still face taxes of up to 100%, despite the maturity of the industry.

Last month, it was reported that the Indian government is considering the possibility of implementing tax reductions on imported fully assembled 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.

Another major player in the Indian auto sector, Mahindra & Mahindra, has also raised concerns with government officials on lowering the EV tax plan.

The government is making efforts to address the worries of local automakers. Despite these concerns, the government is strong in its position to facilitate easier entry into the EV sector for foreign players, aligning with Prime Minister Modi’s vision of 30% of annual car sales in India to be electric by 2030, compared to the current 2%.

“We will come out with a policy that addresses everyone’s fears,” a government official said, as per the report.

“If India needs to be an EV hub, we need more manufacturers … Local industry need not fear that Tesla or anyone else will wipe them out,” the official added.

India’s EVs market 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, Vietnamese electric car maker VinFast also announced plans to invest $150 Mn-$200 Mn in India to set up a completely knocked down (CKD) assembly unit.

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

EV registrations in India, across vehicle categories, stood at 1,43,325 units in November, a year-on-year jump of over 36%, as per Vahan data.