India enforces a 100% import tariff on fully assembled electric cars with a value exceeding $40,000 (equivalent to over Rs 33 lakhs), while models priced lower are subject to a 70% duty. To illustrate, Tesla’s most affordable vehicle, the Model 3, carries a price tag surpassing $40,000 in the United States. This import levy not only stimulates the growth of domestic electric vehicle manufacturers but also compels international producers to initiate the establishment of manufacturing facilities within the nation.
In accordance with a report from Reuters, a high-ranking government official has asserted that India is actively formulating a novel policy concerning electric vehicles. Under this fresh regulation, the import levies for automobile manufacturers committing to local production will witness a reduction.
The report further suggests that this initiative might follow a proposal put forth by the carmaker owned by Elon Musk, expressing an interest in venturing into the domestic market. As per the report, this policy alteration might potentially grant automakers the opportunity to import fully assembled electric vehicles into India with a diminished tax rate of 15%.
Nevertheless, it should be noted that this policy alteration is currently speculative.
The prospective implications of this policy revision on the domestic electric vehicle market are noteworthy. This rumored policy transformation has the potential to drive down the cost of imported electric vehicles, prompting local car manufacturers to contemplate countermeasures. Beyond just Tesla, this maneuver could facilitate other global automakers in accessing the world’s third-largest automobile market. While electric vehicle sales constitute less than 2% of total car sales in India, their market share is expanding at a rapid pace.
As indicated by the report, the reduced import tariffs might provide a boost to Tesla’s efforts to vend its comprehensive range of electric vehicle models in India. The U.S.-based automotive manufacturer has previously engaged with the government on various occasions. In the month of July, the company submitted a proposal outlining its plans to manufacture 500,000 electric vehicles annually, with prices starting from Rs 20 lakh. Notably, Tesla unveiled this scheme shortly after Prime Minister Modi and Elon Musk convened during the latter’s trip to the United States in June.
