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India Considers Cutting Import Taxes If Local EV Manufacturers Grow As Part Of The Tesla Push

India Considers Cutting Import Taxes If Local EV Manufacturers Grow As Part Of The Tesla Push
Following a suggestion by Tesla, which is thinking about entering the Indian domestic market, the government is working on a new electric vehicle policy that would reduce import duties for manufacturers that commit to some local manufacturing, according a Reuters report quoting sources with direct knowledge of the matter .
According to two individuals, including a senior Indian government official, the strategy under consideration might allow automakers to import fully-built EVs into India at a reduced tax of as little as 15%, down from the current 100% that applies to cars that cost more than $40,000 and 70% for the remainder.
For instance, the base price of Tesla's most popular Model Y in the United States is $47,740 before tax credits.
"There is an understanding with Tesla's proposal and government is showing interest," said the official, who is familiar with the issue.
There were no comments available from India's commerce and finance ministries, and Tesla.
If such a strategy is implemented, the cost of imported EVs, which local automakers have been keen to avoid, may be drastically reduced. Beyond Tesla, it may also provide access to the third-largest auto market in the world, where EV sales are still less than 2% of all auto sales but are rising quickly.
According to a third source, Tesla may be able to sell all of its models in India rather than just the brand-new vehicle it plans to manufacture there because to the cheaper import duties.
The benchmark auto index experienced an intra-day loss of 1.1% as shares of Tata Motors, the country's largest producer of electric vehicles, plummeted by about 3% and those of rival Mahindra and Mahindra by over 2% in response to the Reuters report.
As any reduction in tariffs on imported EVs could upset local businesses like Tata and Mahindra who are investing to produce electric cars domestically, the Indian source added, New Delhi will proceed cautiously in assessing the policy suggestion.
"This is going to go through a lot of deliberations even though government is keen on getting Tesla. That's because of the impact on domestic players," said the official.
According to two sources, the policy is still being thought through, and the final tax rate may alter.
Similar actions have been taken by other nations to encourage EV manufacturing commitments. To entice Chinese players and Tesla, Indonesia, for instance, has offered to decrease import duties from 50% to zero for EV makers contemplating investments.
By attempting to have the 100% EV import tariff reduced in 2021, Tesla made its first attempt to enter the Indian market. When officials made clear that Tesla would need to first commit to local manufacture, last year's negotiations between the business and the Indian government came to an end.
More recently, Tesla has informed Indian officials that it is eager to establish a local manufacturing and produce a new EV for the Indian market as well as export that costs around $24,000, or around 25% less than its current entry model.
Rohan Patel, a senior executive at Tesla responsible for business development and public policy, recently had private meetings with important figures. Prime Minister Narendra Modi, who met with CEO Elon Musk in June, has been closely monitoring developments, according to Reuters.
According to the sources, Tesla promoted a reduced import tax proposal that was conditional on a production commitment even though Indian officials made it clear that there would be no special benefits for the company to enter the market.
According to one of the sources, Tesla informed Indian officials that a possible India factory may be fully operational by 2030.
Tesla now operates factories outside of the US in Shanghai, which is its largest facility globally, and in Berlin. A new factory is being built in Mexico that will concentrate on a new mass-market EV platform that Musk claims would lower prices for consumers.

Christopher J. Mitchell

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