According to the individual, the government is considering the best way to handle a tax decrease on EVs, but they want to see some benefit, even if it merely means Tesla agrees to source parts domestically.
Two senior government sources told Reuters that India is considering lowering import levies on electric cars to as low as 40%, days after Tesla calls for a reduction polarised the country’s auto industry.
According to Reuters, the government is considering lowering the tax rate on imported electric cars (EVs) with a value of less than $40,000 – including the car’s cost, insurance, and freight – from 60% to 40%.
It is considering lowering the rate to 60% from 100% for EVs worth more than $40,000, according to them.
“We haven’t firmed up the reduction in duties yet, but there are discussions that are ongoing,” one of the officials said.
With yearly sales of around 3 million automobiles, India is the world’s fifth-largest car market, yet the bulk of cars sold are priced around $20,000. According to industry estimates, electric vehicles account for a small percentage of total vehicle sales, and premium electric vehicle sales are minimal.
In its appeal to the government, Tesla suggested that decreasing import levies on electric vehicles to 40% would make them more affordable and promote sales, as originally reported by Reuters in July.
This sparked a rare public debate among automakers about whether such a move would be incompatible with India’s efforts to boost domestic production.
Nonetheless, the government is in favor of a cut if it can show firms like Tesla benefiting the domestic economy in some way – for example, by manufacturing locally or offering a precise timeframe on when it will be able to, according to one of the officials.
“Reducing import duties is not a problem as not many EVs are imported in the country. But we need some economic gain out of that. We also have to balance the concerns of the domestic players,” according to the officials.
Last month, Tesla CEO Elon Musk remarked on Twitter that if the firm was successful with vehicle imports, local manufacturing in India was “quite likely,” but that vehicle import duties are hefty.
The second official stated that because the duty reduction is only being examined for EVs and not other types of imported automobiles, domestic automakers, who mostly manufacture economical gasoline-powered vehicles, need not be concerned.
According to the source, India’s finance and commerce ministries, as well as the federal think tank Niti Aayog, which is chaired by Prime Minister Narendra Modi, are discussing the concept, and all stakeholders would be consulted.
India’s commerce and finance ministries, as well as Niti Aayog, did not respond to requests for comment immediately.
For years, automakers such as Daimler’s Mercedes-Benz, and Audi have fought for lower import levies on luxury vehicles, but have faced strong opposition, primarily from domestic firms. As a result, India’s luxury car market has remained tiny with average sales of roughly 35,000 vehicles a year.
Tesla’s vehicles would be classified as high-end electric vehicles, which are largely imported into India and account for a far smaller fraction of total sales. Imported luxury EVs are sold in the country by Mercedes, Jaguar Land Rover, and Audi.
