Several government agencies back Tesla’s proposal for reduction in import duty

Several government agencies, including the road transport ministry, department for promotion of industry and internal trade, and NITI Aayog, are backing Tesla’s proposal for a reduction in import duty.

Tesla CEO Elon Musk has been discussing an entry into India for the last few years but it is contingent upon the concessions. According to sources, Tesla has sought a lower import duty of 40% from the current 60% on fully assembled electric cars priced below $40,000 and 60% from current 100% on vehicles above $40,000.

Government sources told ToI that the heavy industries ministry is the sole dissenter amid strong opposition from some of the largest auto industry players. They argued that the concessions could help in the medium-term. The officials highlighted that there is discussion around the tariff cuts coming with certain conditions, which may include a mandated level of infrastructure creation in the form of charging stations or similar requirements.

However, some sections in the government are in favor of getting the company to invest in charging infrastructure, which will not just help Tesla buyers but can also come handy for other electric vehicle users as well. They, as per the report, are arguing that the component suppliers may not be immediately available and in any case tracking compliance is often tough.

Nitin Gadkari, Union Road Transport Minister, had earlier urged the top company executives that Tesla must have its manufacturing unit in India. “If they have to manufacture here, they need the numbers and no one can test the market when you impose such high import duty on the vehicles,” an officer told ToI. The proponents of local sourcing believe it will help develop a vendor base in India, which will be beneficial for the EV space in the long run.

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It should be noted that the government has been seeking to promote electric vehicles in India, but the resistance from the domestic auto manufacturers has forced it to go slow apart from turf issue between the road ministry and NITI Aayog.

According to industry estimates, India is the world’s fifth-largest car market with annual sales of about three million vehicles but the majority of cars sold are priced below $20,000. EVs make up a fraction of the total and luxury EV sales are negligible.