Government plans to reduce 15% tax on import of Electric Vehicles

According to two individuals, including a senior Indian government official, the strategy under consideration might allow automakers to import fully built Electric Vehicles into India at a reduced tax of as little as 15%, down from the current 100% that applies to cars that cost more than $40,000 and 70% for the remainder.

Following a suggestion by Tesla, which is considering joining the domestic market, India is working on a new electric vehicle policy that would reduce import duties for manufacturers that commit to some local manufacturing, according to sources with direct knowledge.

According to two individuals, including a senior Indian government official, the strategy under consideration might allow automakers to import fully built Electric Vehicles into India at a reduced tax of as little as 15%, down from the current 100% that applies to cars that cost more than $40,000 and 70% for the remainder.

For instance, the Model Y, Tesla’s most popular vehicle, has a starting price of $47,740 in the US before tax credits.

electric vehicles

The official, who is aware with the matter, stated that there is an understanding with Tesla’s proposal and that the government is expressing interest.

The price of imported Electric Vehicles, which local automakers have been keen to avoid, might be significantly cut if such a strategy is implemented. Beyond Tesla, it may also provide access to the third-largest auto market in the world, where Electric Vehicles sales are still less than 2% of all auto sales but are rising quickly.

According to a third source, Tesla may be able to sell all of its models in India rather than just the brand-new vehicle it plans to manufacture there because to the cheaper import duties.

electric vehicle

Other nations have encouraged EVs production pledges by taking similar measures. To entice Chinese players and Tesla, Indonesia, for instance, has offered to decrease import duties from 50% to zero for EV makers contemplating investments.

electric vehicles

Requests for response from the Indian ministries of trade and finance as well as Tesla went unanswered Two sources claim that the idea is still being considered and that the final tax rate might change.

By attempting to have the 100% Eletric Vehicles import tariff reduced in 2021, Elon Musk made its first attempt to enter the Indian market. When officials made clear that Tesla would need to first commit to local manufacture, last year’s negotiations between the business and the Indian government came to an end.

More recently, Elon Musk has expressed interest in establishing a local manufacturing and producing a new EVs for the Indian market as well as export that costs roughly $24,000, or around 25% less than its current entry model.

“LOT OF DELIBERATIONS” 

Tesla now operates factories outside of the US in Shanghai, which is its largest facility globally, and in Berlin. A new plant is being constructed in Mexico that will focus on a new mass-market electric vehicle platform that Musk promises would bring down consumer pricing.

Rohan Patel, senior public policy and business development executive at Tesla, has recently had private meetings with high officials regarding plans for India. Prime Minister Narendra Modi, who met with CEO Elon Musk in June, has been closely monitoring developments, according to Reuters.

According to one of the sources, Tesla informed Indian officials that a possible India factory may be fully operational by 2030.

The suggestion for a low import tax, conditional on a manufacturing commitment, was presented by Tesla to appease both sides, the sources claimed. However, Indian officials have stated that there will be no special benefits for Elon Musk’s market entry.

Even yet, New Delhi would take its time reviewing the policy proposal because any reduction in the tax rate on imported EVs will upset local businesses like Tata Motors TAMO.NS and Mahindra & Mahindra MAHM.NS, which are making investments to produce electric vehicles domestically.

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