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Business News/ Politics / Policy/  India considers reducing import tax on EV post Tesla's investment proposal: Report
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India considers reducing import tax on EV post Tesla's investment proposal: Report

The policy that the India government is mulling, sees the import tax reduced to as low as 15% as opposed to the current 100% for cars that cost above ₹33 lakhs and 70% for the rest.

Energy Efficiency Services Ltd, or EESL, has again postponed the procurement of 10,000 units of electric vehicles to 2019 because of lack of car charging infrastructure. Photo:Premium
Energy Efficiency Services Ltd, or EESL, has again postponed the procurement of 10,000 units of electric vehicles to 2019 because of lack of car charging infrastructure. Photo:

Indian government is considering slashing import tax on electric vehicle for automobile manufacturers if they tie up with a local manufacturing unit. The move comes after Elon Musk's Tesla made an investment proposal to set up a car factory in India, a way to enter the domestic market.

According to an exclusive report by Reuters, the import tax could be reduced to as low as 15% as opposed to the current 100% for cars that cost above 33 Lakhs and 70% for the rest.

The Reuters report citing people familiar with the development noted that the move if implemented could allow electric vehicle makers to import fully-built EVs into India with just 15% import tax to be paid to the Indian Government.

"There is an understanding with Tesla's proposal and government is showing interest," the Reuters report cited the official familiar with the development.

What would less import duty mean for EVs in India?

If India Government implements the reduction in import tax this would inevitably also bring down the cost of imported electric vehicles in the domestic market.

Notably, local carmakers have been avoiding delving much into the EV variant manufacturing. However, with more and more companies entering the Indian market with their EVs, it would force a drastic change in the Indian automobile sector.

The reduction in import tax would also encourage 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, Reuters cited another official.

Tesla in India

After much speculation and deliberation, Elon Musk had visited India to discuss a Tesla insertion in the domestic car market. Tesla first tried to enter India in 2021 by pushing officials to lower the 100% import tax for EVs.

Last year Musk and India's probable deal did not go through as the latter pushed for a commitment to local manufacturing.

Following that Elon Musk and Tesla informed India that it would set up a local factory make a new EV priced in the range of over 19 lakhs. This is a value, 25% cheaper than Tesla's entry model for both the Indian market and export.

Tesla told Indian officials a potential India factory could operate at full capacity by 2030, Reuters reported.

EV import duty in other nations

The push to convert to electric vehicle has found substance after many nations have committed to shift from petrol and diesel based vehicle manufacturing in a bid to reduce carbon emission.

However, EVs remain a rather expensive buying option for developing nations and especially the global south, which otherwise accounts for a substantial car market.

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 aimed at attracting Chinese players and Tesla.

(With inputs from Reuters)

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Published: 25 Aug 2023, 02:27 PM IST
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