Tesla Must Source $500M Of Auto Components From India To Be Considered For Tax Cut

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The administration of Prime Minister Narendra Modi has formally told Tesla to ramp up domestic sourcing, but is yet to relay a procurement target to the company

Tesla Inc. would need to commit to sourcing at least $500 million of auto components from India for the electric carmaker’s request for an import tax cut on its vehicles to be considered, a person familiar with the government’s thinking said.

India would consider a tax cut for US-based electric vehicle maker Tesla only if it commit to sourcing at least $500 million of auto components from India, as per a report by Bloomberg.

Additionally, Tesla would need to agree to ramp up Indian parts purchases by around 10 percent to 15 percent a year until a satisfactory level was achieved, the source close to the development told the publication.

The administration of Prime Minister Narendra Modi has formally told Tesla to ramp up domestic sourcing, but is yet to relay a procurement target to the company, the person said.

Tesla in August claimed it sourced around $100 million in parts from India.

This is in response to a tweet Tesla CEO Elon Musk made in July last year regarding import levies in India. Musk claimed they were among the highest in the world and that the nation treats clean-energy vehicles the same as gas-guzzling cars, which isn’t consistent with its goal of reaching carbon neutrality.

To progress on its tax-cut bid, Tesla must approach the government with a component-sourcing plan that’s proportional to its car sales forecast in India, the person said. It should also export made-in-India components to China if it plans to import cars from there, the person said.

India earlier this month rejected Tesla’s call for lower taxes to import electric cars, saying existing rules already allow partially-built vehicles to be brought in and then assembled locally at a cheaper levy.

Imported EVs attract taxes of as much as 100 percent, while there are import duties of between 15 percent to 30 percent on parts shipped for assembly in the nation.

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