Tesla Inc. of the USA has written to various ministries in India seeking reductions in import duties on electric vehicles (EVs) and claim that this will boost the demand for EVs and generate revenue for the government as well.
However, Tesla’s proposal is likely to face resistance from Prime Minister Narendra Modi’s administration which has a stern stance on high import taxes for many industries with the aim to boost local manufacturing.
In the past, many other luxury automakers in India have also lobbied the government in the past to lower taxes on imported cars but have had little success due to opposition from rivals with domestic operations.
Last year when asked on Twitter when Tesla would be available in India, Elon Musk, the founder and CEO of Tesla Inc promised that by the end of 2021 they’d be selling Tesla EVs in India.
Sources say that in the letter to ministries and the country’s leading think-tank Niti Aayog, the American automaker said that slashing federal taxes on imports of fully assembled electric cars to 40% would be more appropriate. As of now, the current tariff rates for the import of automobiles are 60% for cars priced below $40,000 and 100% for those above $40,000. According to Tesla’s U.S. website, only one model is priced below $40,000 and that is the Model 3 Standard Range Plus.
(Tesla Model 3, Tesla’s only model is priced below $40,000)
In the letter, Tesla said, “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.”
Soon after this, responding to Indian Youtuber Madan Gowri’s tweet which read, “Dear Elon Musk please launch Tesla cars in India ASAP,” Elon replied and said, “Want to launch Tesla in India, but import duties are the highest in the world by far of any large country. Moreover, clean energy vehicles are treated the same as diesel or petrol, which does not seem entirely consistent with the climate goals of India.”
When another took the chance to question if Tesla would go forward with locally assembled vehicles, to which Musk responded that they are “hopeful for at least temporary tariff relief” and added, “If Tesla is able to succeed with imported vehicles, then a factory in India is quite likely.”
India’s Minister for Transport Nitin Gadkari told the press in March that India would be willing to offer incentives to ensure Tesla’s cost of production in the country is less than that in China, but only if it manufactures locally.
Tesla registered a local company in India in January this year and has started local hiring while also scouting for showroom space to sell its cars in India. While lower tariffs and duties would give Tesla a better chance to test the market, its plan to begin sales in India does not completely on a change in government policy and will go ahead with its plans as earlier discussed.