It’s no secret that Tesla has been eyeing the Indian automotive market for a while now, with an official entry into the country expected in the coming months. In a new development, the company has proposed a revised import duty structure to make electric cars more viable.
Tesla wrote a letter to the think-tank Niti Aayog as well as the ministries of transport and heavy industries to slash the federal tax on fully assembled electric cars imported to India to 40%, according to information received by Reuters.
Currently, in India, cars priced up to $40,000 are subject to 60% tax, which goes to 100% once the $40,000 threshold is crossed — a move meant to encourage local manufacturing and employment. Only the base variant of the Tesla Model 3 is priced below $40,000, according to the company’s website.
"The argument is that at 40% import duty, electric cars can become more affordable but the threshold is still high enough to compel companies to manufacture locally if demand picks up," said one of the sources without wanting to be named.
However, the source also said that Tesla’s entry into India will not rely on the change in government regulations. Earlier this year, a local company was registered in India along with a few high-profile hirings, but official information remains scarce.
But we are hopeful that there will be at least a temporary tariff relief for electric vehicles. That would be much appreciated.July 23, 2021
In a Twitter exchange, Tesla’s CEO Elon Musk mentioned that a local assembly factory in India is “quite likely” if the initial response to imported vehicles is positive. He also said that Tesla wants to sell cars in India but the import duties are amongst the highest in the world which contradicts the country’s climate goals — but remains hopeful that there will at least be a temporary relief.
Multiple Indian states have made proposals to Tesla offering subsidies and benefits to make a local setup more viable. Transport Minister Nitin Gadkari even went on record to say that India would be willing to offer strong incentives that would make the cost of production lower than that of even China, provided it manufactures locally.
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