Modi govt planning to slash import duty of electric vehicles to 15% from 100% after Tesla proposal

Modi govt planning to slash import duty of electric vehicles to 15% from 100% after Tesla proposal

The long wait for entry of Tesla cars may be over as the Indian government is reportedly working on a new electric vehicle policy reducing import duty on imported cars. According to a report by Reuters, officials in the Modi government have said that the new policy could allow automobile companies to import fully-built electric cars to be imported at just 15% import duty, provided the companies promise investment in domestic manufacturing.

The report also claims that the proposal was made by Tesla, and that the govt is considering the same. “There is an understanding with Tesla’s proposal and government is showing interest,” Reuters quoted an official, saying that the official is familiar with the issue.

The import duty on fully-built cars at present is 100% for cars costing over $40,000, while it is 70% for the rest. This high tax makes imported cars prohibitively expensive. The price of the cheapest Tesla car, the Model Y, starts at $47,740 in the US, which means all Tesla cars arrack 100% import duty if imported as fully built.  

As per automobile websites, the price of Model Y is Rs 50 lakh in India, while Model S costs Rs 1.5 crore and Model X costs Rs 2 crore. Model 3 is slightly costlier than Model Y at Rs 60 lakh. However, if the report is correct and the govt indeed slashes the import duty to 15% against the promise of starting domestic manufacturing, Tesla and other cars not currently made in India will become much cheaper in the country, provided the automakers commit to starting Indian manufacturing of such cars.

However, the report stated that the govt will move slowly on the move as it can disrupt the market and upset local players like Tata and Mahindra which made substantial investments in electric cars. “This is going to go through a lot of deliberations even though the government is keen on getting Tesla. That’s because of the impact on domestic players,” the official was quoted as saying.

However, Finance Minister Nirmala Sitharaman told reporters that there is no proposal in front of her to reduce import duties on electric vehicles. Commerce ministry and Tesla has not commented on the issue.

It is notable that recently it was reported that Tesla is launching an affordable car costing around $24,000 which will be made in India. Tesla has expressed an interest in building a factory in India that would produce low-cost electric vehicles for the local market and for export. This was discussed during a meeting senior Tesla officials had with Commerce Minister Piyush Goyal last month.

Tesla’s senior public policy and business development executive Rohan Patel, and vice president for supply chain, Roshan Thomas, also met officials from the Invest India agency. At the same time, it was reported that Tesla has leased office space in Pune along with an Indian partner.

This comes after PM Modi met CEO Elon Musk during his US visit in June. After the meeting Musk had said that Tesla will enter India soon. He had said, “I am planning to visit India next year. I am confident that Tesla will be in India and we will do so as soon as humanly possible.

“I would like to thank PM Modi for his support and hopefully, we will be able to announce something in the future,” Elon Musk had further added.

At present Tesla has plants at two locations outside the US, China and Germany, and is building a plant in Mexico, which will manufacture a new mass-market car.

Tesla currently makes flagship Model S, Model X, Model 3, and Model Y and has started delivering the Cybertruck after a long delay. The company also makes an electric semi-truck named Tesla Semi. It is also working on the second generation of the electric sports car Roadster, and the rumoured Model 2, which could be the cheaper car to be made in India and Mexico.

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