The Indian government declared no intention to launch new subsidies or tax exemptions for imported electric vehicles, BNN Bloomberg reports.
This decision can potentially delay Tesla’s imminent penetration in India’s electric vehicle market – again.
Report highlights
As per the report, the Ministry of Commerce and Industry’s Junior Minister Som Parkash told the parliament late Wednesday that the government is not currently planning to cut taxes on imported EVs.
“Presently, there is no proposal either to provide an exemption from local value addition cost or to provide a subsidy on the import duty on electric vehicles in India.”
Som Parkash, the Ministry of Commerce and Industry’s Junior Minister
Junior Minister Parkash further noted that India’s current policies seek to bolster local and foreign investment in its electric vehicle industry. In 2021, it announced a $3.1 billion incentive program to support domestic manufacturing. It also launched a $2 billion incentive scheme for companies seeking to establish a battery factory in the country.
The MOCI’s recent remarks are undoubtedly surprising, considering India’s previous plans to work on a new policy that promises to lower import taxes for companies committing to invest in local production.
Therefore, the recent progress in the negotiations between Tesla and India is likely to end in another standoff.
Tesla’s failed attempts
India has long been attempting to enter India, considering the country’s enormous auto industry and large population.
However, the high import taxes for electric vehicle imports continue to discourage Tesla from expanding in the country.
Recent negotiations revealed that India requires Tesla to invest in local electric vehicle production. On the other hand, the Musk-led company refuses to do so without testing the demand first with imported models.
Indian officials announced last month that they are contemplating the American EV giant’s request to access lower import taxes. Previous reports had also suggested that Tesla was approaching a $2 billion deal to construct a factory in India.
The negotiations seem to try to secure a commitment from Tesla to build a local factory to enjoy a lower import tax on its EVs. It will apparently allow the automaker to establish its market even before the new factory’s operation.
However, the recent announcement from the Indian government suggests that these deals are now off the table.
Potential effects
Junior Minister Parkash’s revelations come as a huge blow to the American EV giant’s plans to bring its models to the Indian market.
This could also be a significant setback for the Indian government’s efforts to court Tesla and gain its investment.
Tesla strongly insists that Indian officials reduce the current 100% import taxes on electric vehicles first before it builds a production plant. However, the government’s new outlook on import taxes could once again delay Tesla’s plans to invest in the country’s growing EV industry.
Notably, local reports previously revealed that Tesla and India were about to hit a deal that would allow the automaker to import its EVs for lower taxes (15% from the current 100%) from 2024 and build the Giga India within two years.
