Elon Musk’s Tesla is on the brink of venturing into the Indian market as the government contemplates a policy that could greatly benefit the electric vehicle (EV) manufacturer. Reports from The Economic Times indicate that the Centre is in the final stages of formulating a policy aimed at extending concessional import duties on EVs, potentially easing Tesla’s entry into India.
The proposed policy, if enacted, would extend concessional import duties on electric cars valued over ₹30 lakh ($36,000) for a period of 2-3 years, offering a significant boost to Tesla’s prospects in India. This initiative is anticipated to stimulate employment opportunities and drive down the prices of EVs across the country.
Sources suggest that the reduction in import duties could be contingent upon Tesla’s commitment to establish an EV manufacturing facility in India, possibly requiring bank guarantees as assurance. Despite speculations surrounding Tesla’s announcement during the Vibrant Gujarat 2024 summit, concrete decisions regarding the establishment of such a manufacturing plant by Elon Musk are yet to be made.
Under the current policy framework, India imposes a 100 percent import duty on cars exceeding $40,000 (₹33 lakh), and a 60 percent import duty on cars valued below this threshold. Tesla has expressed its intent to invest up to $2 billion in India and enter the EV market if the government reduces the import duty to 15 percent for the initial two years of operation.
Consequently, the government is deliberating on the reduction of concessional import duties, with the policy’s finalization contingent upon considerations of bank guarantees. These guarantees would serve as recourse if Tesla fails to adhere to the stipulated investment timeline.
Presently, domestic companies such as Mahindra and Mahindra, Tata, and Ola Electric dominate the EV manufacturing landscape in India. These companies have advocated for a level playing field, voicing concerns over potential advantages afforded to international players like Tesla.
Mahindra & Mahindra has actively engaged with government officials, emphasizing the importance of bolstering domestic manufacturing capabilities. Meanwhile, Ola CEO Bhavish Aggarwal has underscored the risks associated with incentivizing foreign players, warning of adverse impacts on sales for indigenous manufacturers.
