India said that it will lower import taxes on certain electric vehicles for companies committing to at least $500 million in investment and manufacturing facilities within three years, which may boost Tesla’s plans to enter in Indian market.
This policy is a big boost for Tesla as it’s in pipe with what the company had lobbying for in New Delhi.
As per sources said last July that the Tesla had offer to build a factory but, in the meantime, want a cut in import taxes that CEO Elon Musk said were among the highest in the world.
Elon Musk has try to enter the Indian market but New Delhi wasn’t keen unless he commit to local manufacturing.
Tesla officials visit India many times in recent months, with Elon Musk also meeting Prime Minister Narendra Modi in 2023.
Companies that meet the investment and manufacturing requirements will be allow to import a limited number of EVs at a lower tax of 15% on cars costing $35,000 (approx. Rs. 29 lakh) and above.
India currently levies a tax of 70% or 100% on import cars and EVs depending on their value.
Piyush Goyal said to reporters at a press briefing after the policy was made public by his ministry :
“We invite global companies to come to India. I’m confident India will become a global hub for EV manufacturing and this will create jobs and improve trade,”.
He said the move will benefit consumers who will get EVs at a cheaper price while also helping the government’s objective of reducing oil imports and therefore foreign exchange outflows.
India’s EV market is small but growing with domestic carmaker Tata Motors dominating sales.
Electric models made up about 2% of total car sales in India in 2023 and the government wants to increase that to 30% by 2030.
This new policy will open the door for global automakers to enter India at a time when the pace of growth of EVs is slowing, forcing companies to look for newer markets to boost sales.
As Vietnamese EV maker VinFast has said it plans to invest $2 billion (approx. Rs. 16,577 crore) in India and in February 2024 began construction of a local factory in the southern state of Tamil Nadu.
VinFast had also ask the government to reduce import duties on EVs for about two years so customers can get familiar with its products while its local plant comes on stream.
India has been working on this policy for many months, as per reports, despite lobbying from Tata Motors and Mahindra & Mahindra which fear the lowering of import taxes on EVs would hurt the domestic industry and its investors.
Under this new policy, which is effective immediately, EV imports at a lower tax rate will be allow for a maximum of 5 years and the total number will be cap at 8,000 a year.
