Tesla is poised to enter the Indian market with reduced import duties contingent on local manufacturing investment, as the government aims to bolster domestic employment and localization efforts, sparking cautious reactions from Indian automakers wary of potential advantages for the American company.

Tesla Import Duty Reduction: What you need to know!

Tesla, the American electric vehicle manufacturer, is on the brink of establishing a presence in India as the government nears finalization of a policy aimed at extending favorable import duties on electric cars priced over INR 30 lakh (approximately USD 36,000) for a period of 2-3 years. It’s anticipated that these reduced import duties will be provided in exchange for Tesla’s commitment to invest in the construction of an electric vehicle factory within the country, as per sources familiar with the matter.

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Presently, India levies a 100% import duty on cars valued at over USD 40,000 (about INR 33 lakh) inclusive of cost, insurance, and freight, and 60% on those priced below this threshold. Tesla has expressed readiness to invest as much as USD 2 billion provided the Indian government grants a reduced import duty of 15% on imported electric vehicles during the initial two years of operations.

The Indian government is eager for foreign automakers entering the country’s burgeoning market to expedite plans for local manufacturing, aiming to enhance employment opportunities and reduce electric vehicle prices through localization efforts. “The government is considering a temporary reduction in import duties, contingent on bank guarantees. The specific amount of the bank guarantee is yet to be determined, but the intention is to ensure that companies follow through with timely investments and establish local factories,” stated one of the sources mentioned above. Bank guarantees could be cashed in if companies fail to comply with the specified investment timelines.

With the possibility of relaxed import duties for Tesla looming, Indian automakers are adopting a cautious stance, observing the situation before taking action. A senior industry executive, speaking anonymously, highlighted that while the industry has not officially objected to the government’s proposal, several carmakers are apprehensive that a reduction in import duties could unfairly favor the American automaker, especially considering Tesla’s lack of concrete investment plans in India.

Last month, Anish Shah, managing director of Mahindra & Mahindra (M&M), disclosed that his company had communicated with government officials, advocating for global EV manufacturers to be encouraged to invest in India.

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Source – ET Times

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Tesla Prompts Reduction in Import Duty to Enter India!