Setback for Tesla, India has no plans to reduce import duties

Weeks after EV major Tesla took to Twitter to highlight India’s high taxes, the government said it has no plans to cut import duties on electric vehicles. Krishan Pal Gurjar, Junior Minister, told the Parliament on Monday that no such proposal is under consideration in the Ministry of Heavy Industries. However, he said the government is taking steps to promote the use of electric cars by lowering domestic taxes and adding charging stations.

Elon Musk, CEO of Tesla, was looking at the possibility of setting up a local factory once it starts selling wholly-built units from overseas in India. Tesla had urged the Indian government, through a tweet, to allow it to import cars more cheaply before it commits to setting up a factory in the country. Last month, the EV maker had written to the transport and industry ministries requesting them to slash duty on electric cars to 40% from the current range of 60% – 100%.

Over the years, Musk has shown eagerness to enter India – one of the world’s most promising automobile markets. But he complained that Indian rules prohibit him from testing the waters first with imports, as high duties make Tesla cars unaffordable.

Musk, in a tweet, had stated that a Tesla factory to produce cars in India is “quite likely” if the electric automaker can first begin sales with imported vehicles. According to Bloomberg, Tesla is seeking to make inroads into Asia’s third largest economy, where electric vehicles account for less than 1% of annual car sales, compared with about 5% in China.

It highlighted that the sparse charging infrastructure and expensive cost have deterred large scale adoption of electric vehicles in India, unlike China, where Tesla has its first factory outside the United States, and now dominates electric-car sales.

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RC Bhargava, Maruti Suzuki Motor Corp, Chairman, in the company’s annual report said the market penetration of electric vehicles will be very small given that only 5% of cars sold in India are priced above Rs 1.5 million. “The per capita income in India is only $2,000, 5% of that in Europe and Japan, which puts expensive electric cars beyond the reach of most consumers.”

Bhargava pointed out that the technology presently available leads to electric cars being produced at a cost much higher than the conventional cars. “This, along with the lack of charging infrastructure makes it very difficult to sell electric cars to people who can only afford small cars.”