New Delhi — India is working on a new electric vehicle (EV) policy that would slash import taxes for automakers that commit to some local manufacturing, following a proposal by Tesla, which is considering entering the domestic market, say people with direct knowledge of the plan.
The policy being considered could allow automakers to import fully built EVs into India at a reduced tax as low as 15%, compared to the current 100% that applies to cars which cost above $40,000 (about R750,000) and 70% for the rest.
Tesla's best-selling Model Y, for example, starts at $47,740 in the US before tax credits.
“There is an understanding with Tesla's proposal and government is showing interest,” said a senior government official.
Tesla and India's commerce and finance ministries did not respond to requests for comment.
If such a policy is adopted, it could amount to a drastic reduction in the cost of imported EVs that local carmakers have been keen to avoid.
It could also open the door for global automakers, beyond Tesla, to tap the world's third-largest car market, where sales of EVs are less than 2% of total car sales but growing rapidly.
The lower import taxes could help Tesla sell its full range of models in India, and not just the new car it wants to make locally, said a third source.
Shares of Tata Motors, India's largest electric car manufacturer, fell nearly 3% on the report, while rival Mahindra dropped more than 2%, dragging the benchmark auto index to an intraday low with losses of 1.1%.
New Delhi will move slowly in considering the policy proposal as any lowering of taxes on imported EVs could disrupt the market and upset local players such as Tata and Mahindra that are investing to build electric cars at home, the Indian official said.
“This is going to go through a lot of deliberations even though government is keen on getting Tesla. That's because of the impact on domestic players.”
The policy is still in the initial stages of deliberation and the final tax rate could change, two of the sources said.
Other countries have taken similar measures to spur EV manufacturing commitments. Indonesia, for example, has offered to reduce import duties from 50% to zero for EV makers planning investments, a move seen as aimed at attracting Chinese players and Tesla.
Tesla first tried to enter India in 2021 by pushing officials to lower the 100% import tax for EVs. Last year, the talks between Tesla and the Indian government collapsed when officials said the company would have to first commit to local manufacturing.
Outside the US, Tesla has a plant in Shanghai — its largest factory worldwide — and one near Berlin
More recently, Tesla has told Indian officials it is keen to set up a local factory and make a new EV priced around $24,000, roughly 25% cheaper than its current entry model, for both the Indian market and export.
Tesla's senior public policy and business development executive Rohan Patel has in recent weeks met top officials privately. Prime Minister Narendra Modi, who held talks with CEO Elon Musk in June, has reportedly been tracking progress closely.
Indian officials conveyed there will be no special incentives for Tesla's market entry, and the proposal for a low import tax, conditional on a manufacturing commitment, was touted by Tesla to keep both sides happy, the sources said.
One of the sources said Tesla told Indian officials a potential Indian factory could operate at full capacity by 2030.
Outside the US, Tesla currently has a plant in Shanghai — its largest factory worldwide — and one near Berlin.
It is building a new plant in Mexico that will focus on a new mass-market EV platform Musk has said will slash costs for consumers.
Reuters
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