The Indian government might be considering lowering the import tax on electric vehicles (EVs) for automakers that partner with a local manufacturing unit. Currently, the import tax on EVs in India is 100% for cars that cost more than ₹33 lakhs (about $42,000) and 70% for the rest. However, according to an exclusive report by Reuters, if the new policy is implemented, electric vehicle makers may have to pay an import tax as low as 15% to the Indian government.
This comes after Tesla, the electric car company founded by Elon Musk, is planning to enter the domestic market in India. “There is an understanding with Tesla’s proposal and the government is showing interest,” the Reuters report cited the official familiar with the development.
However, the Commerce Ministry of India and Tesla have not yet commented on the plan. Finance Minister Nirmala Sitharaman also said to Reuters that there is “no proposal in front of me” to reduce import duties on EVs.
Less Import Duty on EVs in India means?
If the Indian government reduces import taxes on electric vehicles, it will also lower the cost of these vehicles in the domestic market. This could force local carmakers to start manufacturing more EVs, as they will be more competitive with imported models.
The lower import taxes would also encourage other global automakers to enter the Indian market, which is the third-largest car market in the world. This would be a major boost for the Indian EV market, which is still in its early stages of development.
“The lower import taxes could help Tesla sell its full range of models in India, and not just the new car it wants to make locally”, Reuters cited another official.
Tesla has been trying to enter the Indian market for several years. In 2021, the company tried to persuade the Indian government to lower the import duty on electric vehicles (EVs) from 100%. However, the talks between Tesla and the government collapsed when the government insisted that Tesla commit to local manufacturing first.
More recently, Tesla has told Indian officials that it is willing to set up a local factory in India and produce a new EV priced around $24,000. This would be roughly 25% cheaper than Tesla’s current entry-level model. The new EV would be for both the Indian market and export.