The Indian government is yet to make a final decision on reducing import taxes for electric vehicles (EVs) as part of a proposed policy aimed at incentivising global carmakers to commit to local manufacturing. This potential move has raised concerns among domestic automakers, particularly as Tesla expresses interest in entering the Indian market.
According to media reports, discussions are ongoing regarding the proposed policy, which could slash the existing 100% EV import tax to as low as 15% for car manufacturers willing to invest and manufacture in India. The uncertainty stems from apprehensions within the domestic industry about the potential entry of Tesla and the government’s plans to provide incentives to global carmakers.
The deliberations gained momentum after Tesla expressed interest in establishing a factory in India to produce an EV priced at USD 24,000, offering a competitive edge with a 25% lower cost than Tesla’s current entry model. Reports suggest that Tesla is also advocating for reduced taxes on higher-priced models intended for the Indian market.
Rajesh Kumar Singh, a high-ranking official at India’s Department for Industry and Trade Promotion, revealed during the World Economic Forum meeting in Davos that Tesla is likely to introduce cars in India within the USD 24,000 to USD 36,000 price range, targeting a segment where significant market demand exists.
However, Singh acknowledged the resistance from the domestic industry, which operates within the same EV price segment. He stated, “It’s a very contested area, and we’ve not been able to take a final call on this so far.”
While Singh did not name specific domestic automakers, media reports suggest that Tata Motors and Mahindra & Mahindra have voiced concerns to officials, urging them not to lower EV import taxes to safeguard the interests of local firms in light of Tesla’s potential entry.
Anish Shah, Managing Director of Mahindra & Mahindra, emphasised the need for a level playing field between domestic and foreign EV automakers, advocating for the promotion of local manufacturing. Tesla, on the other hand, has not provided an immediate response to queries regarding the ongoing discussions.
Tesla’s initial attempt to enter the Indian market faced challenges due to demands for lower import taxes, leading to stalled talks with New Delhi in 2022. However, in a recent shift, Tesla has indicated a willingness to establish local manufacturing in alignment with India’s preferences.
Singh noted that discussions are considering the possibility of temporarily lowering tariffs while requiring Tesla to make significant investments and adhere to domestic value-addition criteria. This approach would allow Tesla to bring in a limited number of vehicles for a short period, contingent on commitments to invest and manufacture in India.
Despite the challenges, India’s EV market is witnessing growth, with sales increasing by 115% last year. To further support the transition to electric vehicles, the government is also working on deploying a robust charging infrastructure nationwide, addressing a key concern hindering consumer adoption of EVs, according to Singh.