Global electric vehicle (EV) manufacturing giant Tesla is encountering obstacles in its journey to enter the Indian market, as the government deliberates over the demand to reduce import taxes on electric vehicles (EVs).
A top government official revealed to Reuters that Tesla's aspirations are in limbo due to the government's indecision on lowering import taxes for EVs.
The uncertainty arises amid reports suggesting a potential new policy that could lower import taxes on EVs for manufacturers committed to local production. Rajesh Kumar Singh, a high-ranking official at the Department for Industry and Trade Promotion, stated that Tesla might target a market range of $24,000 to $36,000 for its cars in India, focusing on the segment with the most significant volume potential. However, resistance from domestic industry players in the same price bracket has stalled a conclusive decision.
"It's a very contested area, and we've not been able to take a final call on this so far," Singh remarked on Wednesday.
Tesla's commitment to significant local manufacturing investment in India was contingent on initial benefits from lower import taxes on EVs. The electric vehicle company has been pushing for reduced taxes, citing India's high import duty on vehicles, including EVs. Despite Tesla's appeals, the government maintains that there is no active consideration for such a proposal.
Tesla's proposition, however, faces opposition from domestic automakers, alarmed not only by the potential entry of Tesla but also by the prospect of increased global competition due to concessions. The government has been developing a proposed policy to slash the existing 100% EV import tax to as low as 15% for automakers committing to long-term local investment and manufacturing.
Although Singh did not name specific automakers, earlier reports indicated that major players like Tata Motors and Mahindra & Mahindra have opposed lowering import taxes. These two companies are prominent domestic EV manufacturers in India.
Recently, Mahindra & Mahindra Managing Director Anish Shah emphasized the need for a level playing field between domestic and foreign EV automakers, advocating for the promotion of local manufacturing.
Without a reduction in EV import taxes, Tesla's entry into India might face a delay, similar to its initial attempt when CEO Elon Musk demanded lower import taxes, calling them the "highest in the world by far of any large country."
Singh hinted at the possibility of lowering tariffs for a short period, provided Elon Musk commits to significant investment and domestic value addition criteria. This, Singh suggested, could allow Tesla to import a limited number of vehicles temporarily.
In 2023, out of the 4 million vehicles sold in India, only 82,000 were EVs. Despite this, the EV segment saw a robust growth of 115% in the previous year.
The government aims to bolster EV adoption by improving charging infrastructure across the nation, according to the top official.
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