Keen on entering the growing Indian market, Tesla has one again urged the Prime Minister’s Office (PMO) to slash import taxes on electric vehicles (EVs). Elon Musk’s Tesla wants to begin selling imported cars in India this year, but says taxes in the country are among the highest in the world.
India levies an import duty of 60% on EVs that cost $40,000 or less, and 100% duty on those priced over $40,000. Industry experts believe that at these rates, Tesla cars would become way too expensive for buyers and could limit sales. As such, reports have highlighted that the company has requested for a meeting between Elon Musk and Prime Minister Narendra Modi.
Sources told Reuters that Tesla executives, including its head of policy in India, Manuj Khurana, took the company’s demands to PM Modi’s officials last month in a closed-door meeting. The American company argued that the taxes were way too high. It said India’s duty structure would not make its business in the country a ‘viable proposition’.
However, government officials are divided over the US automaker’s demands. Sources say some officials want the company to commit to local manufacturing before considering any import tax breaks. Union Minister Nitin Gadkari, at the India Today Conclave 2021, earlier this month had said that electric cars manufactured by Tata Motors are not less good than electric cars manufactured by Tesla. “I have told Tesla that don’t sell electric cars in India which your company has manufactured in China. You should manufacture electric cars in India, and also export cars from India,” he said. “Whatever support you (Tesla) want, will be provided by our government.” The road transport and highways minister said he is still in talks with Tesla regarding its demand for tax concessions.
The US-based company in a letter to the road ministry had stated that the effective import tariff of 110% on vehicles with customs value above USD 40,000 is ‘prohibitive’ to zero-emission vehicles. As such, it requested the government to standardize the tariff on electric cars to 40% irrespective of the customs value, and withdraw the social welfare surcharge of 10% on electric cars. Tesla said such changes would boost the development of the Indian EV ecosystem and the company will make significant direct investments in sales, service and charging infrastructure, as well as increase procurement from India for its global operations.
However, there is somewhat of a pushback from Indian automakers. Sources said that Tata Motors, which recently raised $1 billion from investors including TPG to boost EV production locally, believes giving Tesla concessions would be contrary to India’s plans to boost domestic EV manufacturing. “If Tesla was the only EV maker, decreasing duties would have worked. But there are others,” the source said.
It should be noted that the Indian market for premium EVs is still in its infancy and charging infrastructure is scarce. Just 5,000 of the 2.4 million cars sold in India last year were electric.