India Could Reduce Import Duty On EVs

The government of India (GOI) is considering reducing import duties on vehicles imported as completely built units (CBUs) from companies like Tesla in a bid to increase production in India, as per a report. GOI may create a policy regime that involves local sourcing of parts for technologically advanced manufacturers. 

A report, citing highly placed officials, claimed that import duties on electric vehicles could be reduced to as low as 15 per cent from the existing 100 per cent, if manufacturers agree to begin working on manufacturing EVs in India along with locally sourced components. This policy, if implemented, could help Tesla and even other manufacturers’ EV plans for India. 

Indian government officials were not keen on providing tax benefits to Tesla or other manufacturers unless they committed to making investments in the country. Tesla had sought a 40 per cent import tax (CBUs) rather than the current 60 per cent import tax on cars valued under USD 40,000 (roughly Rs 33.30 lakh) and a 100 per cent tax on those valued higher. This lowered import duty will help Tesla sell its entire range – Model S, Model X, Model 3 and Model Y – and not just the new model it is planning to manufacture locally in India. 

Currently, the import duty does not differentiate between electric vehicles and luxury internal combustion engine (ICE) vehicles and levies high import duties on both types of vehicles to encourage local manufacturing. 

Tesla first planned to enter India back in 2021 but later shelved these plans as GOI first wanted the EV maker to commit to local manufacturing due to the high import tax structure. However, these plans were later resumed when Elon Musk, Chief Executive Officer of Tesla, met Prime Minister Narendra Modi earlier this year when Tesla shared plans to start a manufacturing base in the country.