The Indian Government is reportedly considering implementing an import tax reduction on electric vehicles from 100% to just 15%. However, electric automakers must produce at least 40% of the vehicles in the country.
According to people with direct knowledge of the matter, India is now developing a new policy to cut EV import taxes for automakers planning to establish domestic production. It is worth noting the government’s move occurred following Tesla’s proposal to penetrate the local industry.
For context, Tesla initially attempted to bring its EVs into the country in 2021. However, its plans did not materialize as it failed to encourage the government to offer import tax cuts first before following the officials’ demand to build a domestic factory.
New policy highlights
As mentioned, Indian officials are mulling to impose a new EV policy that would essentially reduce import taxes for fully-assembled EV models to 15%. This reduction represents a significant drop from the current 100% import tax for $40,000+ EV models and 70% for all others.
For instance, the Tesla Model Y costs $47,740 in the United States, excluding federal tax credits of up to $7,500. Therefore, the Musk-led company must pay a 100% tax to the Indian Government to import the world’s top-selling vehicle.
“There is an understanding with Tesla’s proposal and government is showing interest.”
Unnamed Senior Indian Government Official
Potential advantages
The new policy can significantly boost India’s electric vehicle industry. It can encourage more global automakers to enter the local market without worrying about substantial import taxes reaching 100%.
In addition, it can also aid Tesla to market its entire EV portfolio in the world’s third-largest auto market. In effect, it can improve EV market share in India from just below 2% of its overall vehicle sales to new heights.
However, it must be noted that the new policy is still undergoing the first phase of deliberation. The sources further said that the government can still change the final import tax rate.
“This is going to go through a lot of deliberations even though the government is keen on getting Tesla. That’s because of the impact on domestic players.”
Unnamed Senior Indian Government Official
See Also:
- Tesla and Indian government negotiations continue to progress
- Tesla executives met with an Indian investment agency for market entry negotiation
- Tesla to meet India’s commerce minister to discuss factory plan for the $24,000 EV
- Tesla, India already in talks to build a Gigafactory for EVs starting at ₹20 lakh
- Indian Industry Minister invites Tesla to build a Gigafactory, highlighting innovation and technological prowess
Tesla previously announced plans to erect an EV factory in India to produce its planned mass-market model that costs $24,000. It aims to sell the new EV in the local and foreign markets.
The potential import price cuts will undoubtedly urge Tesla to finally build its new Gigafactory in India. It will enable the company to manufacture its first-ever low-cost model and bring its other models to the domestic market.
