India Undecided On Reduced EV Import Taxes Amid Local Firm Resistance To Tesla

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Tesla’s impending entry into the Indian market has sparked a reaction from local Original Equipment Manufacturers (OEMs), who are now lobbying the government to maintain the current import tax rates instead of reducing them.

India remains undecided on reducing import taxes for electric vehicles (EVs) under a potential new policy. This policy, aimed at encouraging carmakers to commit to local manufacturing, could facilitate Tesla’s market entry. Despite Tesla’s interest in establishing a factory in India for a $24,000 EV, domestic automakers are voicing concerns. They fear the impact on their market share if Tesla and other global brands receive incentives. The government’s proposed policy includes possibly cutting the current 100% EV import tax to as low as 15% for carmakers willing to invest and manufacture locally. Tesla’s request for lower taxes on its higher-priced models is part of this discussion.

Rajesh Kumar Singh, a prominent official in India’s industry and trade promotion department, highlighted at the Davos World Economic Forum that Tesla aims to target the $24,000 to $36,000 price range in India. This move has sparked resistance from Indian EV manufacturers, who operate in the same price bracket. Singh acknowledged the complexity of the situation, admitting the government’s inability to make a final decision.

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Tata Motors and Mahindra & Mahindra, leading Indian EV makers, have urged officials not to reduce EV import taxes, fearing Tesla’s entry might harm local businesses. Anish Shah, Managing Director of Mahindra & Mahindra, advocated for equal treatment of domestic and foreign EV companies, emphasizing the importance of promoting local manufacturing.

Singh mentioned ongoing discussions about temporarily lowering tariffs, conditional on significant investment and domestic production commitments from companies like Tesla. This approach would allow Tesla to import a limited number of vehicles for a short period, provided there are solid commitments to investing and manufacturing in India.

Tesla’s initial attempt to enter the Indian market involved requesting lower import taxes, which Elon Musk criticized as being exceptionally high. This led to stalled negotiations with New Delhi in 2022. However, Tesla has recently considered establishing local manufacturing, aligning with India’s push for this initiative.

With India selling 4 million cars last year, of which 82,000 were EVs, the emerging EV market saw a 115% growth over the previous year. The government is also focusing on expanding charging infrastructure nationwide, addressing one of the key barriers to EV adoption, as noted by Singh.

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