India is reportedly considering slashing import duties on electric vehicles by as much as 40% after Tesla lobbied the government and dangled the possibility of building a “gigafactory” in the country.
At the time, when Reuters reported Tesla’s lobbying back in late-July, it was expected the calls of Tesla boss Elon Musk would fall on deaf ears in India, considering that India prime minister Narendra Modi has championed high import taxes for many industries in a bid to boost local manufacturing.
Currently, import duties on electric vehicles sit at 60% for EVs with a value of less than $US40,000 – which includes the car’s cost, insurance, and freight – while cars valued over $US40,000 suffer a massive 100% import duty.
However, according to “two senior government officials” who spoke to Reuters this week but remained unidentified because government discussions were still private, India is nevertheless considering cutting its current import duty rates on EVs to as low as 40%.
According to the two sources, the import duty on vehicles valued under $US40,000 would fall to 40% from 60%, while EVs valued over $US40,000 would see their import duty rate cut from 100% to 60%.
“We haven’t firmed up the reduction in duties yet, but there are discussions that are ongoing,” one of the officials told Reuters.
India – which is the world’s fifth-largest car market with annual sales of around 3 million – has unsurprisingly had this discussion before, with other luxury carmakers lobbying the government to lower taxes on imported cars.
But with the majority of cars sold in India priced at below $US20,000, EVs making up only a small fraction of the total, and luxury EV sales all but non-existent, the import duties have remained locked.
Tesla’s calls for a reduction on import duties nevertheless sparked what Reuters described as “a rare public debate among automakers” over whether reducing import duties would squash India’s domestic manufacturing.
The fact that Tesla is considering building a manufacturing facility in India, however, has reportedly been enough to at least get discussions underway.
According to Reuters’ sources, the Indian Government would be in favour of a cut to import duties if Tesla was able to provide some benefit to the domestic economy – such as manufacturing locally, or providing a firm timeline on when they would be able to start manufacturing locally.
“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,” the unnamed official told Reuters. “We also have to balance the concerns of the domestic players.”
Moreover, according to the second official who anonymously spoke to Reuters, the fact that the cut to import duties is only being considered for electric vehicles should mollify local manufacturers which predominantly manufacture affordable ICE vehicles.
