India mulls over lower import duties for Tesla and others in exchange for local EV production commitment
The government of India is reportedly considering a reduction in import duties for automakers like Tesla and other luxury brands, contingent upon their commitment to manufacturing electric vehicles (EVs) in the country. The aim is to encourage global carmakers to produce their new electric cars with a higher degree of localisation. This potential policy change could lead to a decrease in import duties from the current 100 per cent for completely built-up (CBU) vehicle imports to 15 per cent. However, to qualify for the lower import duty, automakers would need to not only manufacture EVs in India but also make investments in the country, utilise local sourcing, and provide bank guarantees.
If carried out, this policy change would benefit high-end car brands such as Audi, BMW, Tesla, Lotus, and other automakers planning to enter the Indian market. The reduced import duty could make it more feasible for these carmakers to offer CBU vehicles in India at initial stages. As a result, luxury and other EV offerings may become more affordable to customers.
Tesla has already expressed its intention to establish a new gigafactory in India with an annual production capacity of 500,000 units. This facility could also be used for exporting vehicles to other countries, particularly emerging EV markets. Tesla officials have engaged in discussions with the Indian government, including a meeting between Prime Minister Narendra Modi and Tesla's CEO, Elon Musk.
While the government's proposed tax regime may benefit a range of automakers, it could pose challenges for domestic brands like Mahindra & Mahindra and Tata Motors, which have plans to invest in local EV production. If global products are offered at competitive prices in India, they may attract more buyers, potentially impacting the sales of local brands.
Source - Pankaj Doval - The Times of India
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