India is building a proposed policy that will reduce an EV import tax of 100% to as little as 15% for automakers that agree to invest and manufacture in the country.
However, the opposition of Indian firms might stall Elon Musk’s arrival in India. New Delhi said on Wednesday it was considering a new policy under which carmakers would commit to local manufacturing and cut import taxes, in particular electric vehicles (EVs), for Tesla Inc.
Tesla’s possible market entry is an issue for local automakers. India has also been developing a proposed policy of reducing the 100% import tax on EVs to as low as 15 percent for automakers willing to invest and manufacture in not-so-not-so-fire.
As Tesla has said it is interested in producing a factory for EVs valued at $24,000 – 25% cheaper than the entry model of its current products – import tax deliberation started after this. Tesla has also requested lower taxes on pricier models the company wants to sell in India, according to Reuters.
“Tesla will most likely try and push something of 10-25 lakh as they know that is where the volumes will be,” said Rajesh Kumar Singh, the top bureaucrat at the department for industry and trade promotion who spoke on Tesla’s strategy at the World Economic Forum meeting in Davos.
The subject is causing resistance from local industries that are also in the same (EV cost) range,” Singh added on Wednesday evening.
It is a highly controversial region and we haven’t been able to reach any conclusive decision yet. Singh did not identify any domestic automakers, but Reuters has learned that Tata Motors – the country’s largest EV maker and Mahindra & Mahindra have lobbied to keep import duties for electric vehicles high to safeguard local firms from Tesla’s competition.
Mahindra & Mahindra Managing Director Anish Shah in an interview this week called for a level playing field between domestic and foreign EV automakers, stating that India must promote local manufacturing.
Tesla did not immediately respond to a request for comment after hours. Tesla initially attempted to gain access to India through lower import taxes, which Elon Musk asserted were “the highest on the planet by a very large margin for any major country”.
However, such a demand on taxes stalled negotiations with New Delhi in 2022. In its turn lately, Tesla has agreed on local manufacturing since India wanted it to do so.
Singh told Reuters that there have been some talks on whether you can temporarily reduce the duty but he (Musk) also agrees with relatively high investment and domestic value addition criteria.
This could see Tesla introduce a few cars for a short time, even though Musk would also have to give his guarantee of “zero investment commitments investing in India and making in India,” Singh said.