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Tesla has again asked the government to slash the import tax on its electric vehicles before entering the Indian market.

The US electric car maker has approached Prime Minister Narendra Modi’s office with the request as it gears up to sell its vehicles, according to sources quoted in a Reuters report.

Elon Musk’s company had earlier asked the government for relaxation of import duty for EVs it plans to sell in India. However, the demand has faced objections from some Indian automakers who said the move would deter investment in domestic manufacturing.

It may be noted that Tesla wants to begin selling imported cars in India as soon as possible, but the company’s plans have taken a backseat due to high taxes levied by India on completely built units (CBU) of imported vehicles.

TESLA PUSHES FOR LOWER IMPORT TAX

Top executives from Tesla including its India policy head Manuj Khurana approached government officials with the company’s demands last month in a closed-door meeting, arguing that the taxes were too high.

This was confirmed by four sources who spoke to news agency Reuters. During the meeting at PM Modi’s office, Tesla executives raised concerns about India’s import duty structure, adding that it would not make its business in the country a “viable proposition”.

At the moment, India levies an import duty of 60 per cent on electric vehicles that cost $40,000 or less, and 100 per cent for those priced anything above. At these rates, Tesla cars would become out of reach for most customers in India, resulting in losses for the company.

Three sources quoted in the Reuters report said Tesla has put in a separate request for a meeting between its CEO Elon Musk and PM Modi.
While it is not yet clear what PM Modi’s office told Tesla executives in response, the four sources quoted in the news agency’s report said government officials are divided over the US automaker’s demands. Some officials want the company to commit to local manufacturing before considering the import duty request.

The sources said that the government is also concerned about the impact on the local auto industry. Tata Motors is one company that has opposed the move, saying that concessions to Tesla would be contrary to India’s plans to boost domestic EV manufacturing. The company recently raised $1 billion from investors to boost local EV production.

A TRICKY CHALLENGE

One of the sources quoted in the report said the government may not have been in a dilemma if Tesla was the only EV maker looking to do business in India. “If Tesla was the only EV maker, decreasing duties would have worked. But there are others,” the source told Reuters.

Even if Tesla manages to get concessions and starts selling EVs in India, it would still face several other challenges.

For instance, the Indian market for premium EVs is still in its infancy and charging infrastructure is scarce. As per data, just 5,000 of the 24 lakh vehicles sold in India last year were electric.

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