India Mulls Tax Cuts to Boost Electric Vehicle Imports and Production to woo Tesla

• ByStartupStory     |    November 14, 2023

India is contemplating tax cuts on the import of completely-built electric vehicles (EVs) for up to five years in an effort to attract international automakers, including Tesla, to sell and manufacture cars in the country. The government is formulating an EV policy that would allow global car manufacturers to import battery-powered vehicles at concessional duty rates, provided they commit to eventual local production in India.

Tesla, the Austin-based EV manufacturer, had previously sought duty cuts on EV imports in 2021, aiming to reduce rates from the existing 70%-100% range to 40%. Discussions are ongoing, and a final decision on the policy’s details is pending. India’s heavy industries and commerce ministries have not provided comments on the matter.

Indian Trade Minister Piyush Goyal visited Tesla’s factory in Fremont, California, stating on social media, “I am proud to see the growing importance of auto component suppliers from India in the Tesla EV supply chain.” Goyal’s visit coincided with discussions around Tesla’s potential investment in the Indian market.

Tesla is eyeing the Indian auto market, where the demand for electric vehicles is rising, especially among the expanding middle class. If realized, Tesla’s investment could align with India’s goals of increasing manufacturing’s share in the GDP and creating employment opportunities.

India’s electric car market is in its early stages, representing only 1.3% of total passenger vehicles sold last year. Challenges such as high car costs, limited options, and a lack of charging infrastructure have hindered EV adoption. The government launched a $3.1 billion incentive program in 2021 to boost local EV production.

In addition to the potential tax cuts for EVs, India is also exploring reduced import taxes on certain EVs from the UK as part of negotiations for a free-trade deal with Britain. These initiatives signal the government’s commitment to accelerating cleaner transport adoption in a country grappling with severe air pollution.

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