In a proactive move to invigorate domestic manufacturing, the Central Government is contemplating a reduction in import duties for fully assembled vehicles, particularly aimed at companies like Tesla, as per a recent report.
Under this envisioned policy framework, advanced technologically-driven vehicle manufacturers would be obliged to procure components from local sources. In a groundbreaking development, import duties on eco-friendly automobiles could see a dramatic drop, decreasing from the prevailing 100% to as low as 15%, provided that automakers commit to initiate production within India and increasingly adopt local sourcing practices.
“The government will also seek commitments from companies to foster a supplier ecosystem, with approximately 20% of parts originating locally within the first two years, subsequently escalating to 40% within the fourth year,” affirmed a source cited by TOI
Such a policy shift holds the potential to pave the way for the entry of globally renowned auto manufacturers such as Tesla, BMW, and Audi into the Indian electric vehicle market.
It’s worth noting that earlier this year, MT had reported the Indian officials’ reluctance to grant duty cuts to Tesla, led by Elon Musk, unless the company displayed a firm commitment to local investments. Tesla had petitioned for a 40% import duty reduction on fully assembled electric vehicles, in contrast to the current rates of 60% for those priced below $40,000 and 100% for vehicles exceeding this threshold.
Tesla’s aspirations center on having its vehicles classified as electric rather than luxury cars. India’s existing customs duty framework, however, makes no distinction between electric and hydrocarbon-based vehicles, imposing substantial duties to encourage local manufacturing.
Tesla’s pursuit of the Indian market initially began in 2021, advocating for a reduction in the 100% import tax on electric vehicles. Negotiations between Tesla and the Indian government had faltered last year due to the government’s insistence on the company’s commitment to local production.
Elon Musk’s meeting with Indian Prime Minister Narendra Modi in June this year provided fresh optimism for Tesla’s entry into the Indian market. Musk conveyed his confidence in Tesla’s imminent presence in India and a significant investment in the relationship between the company and India.
Tesla’s renewed talks with Indian officials in 2023, sharing plans for establishing a manufacturing base in India, have rekindled the prospects of its entry into the Indian electric vehicle sector.
