India won’t consider import tax reduction unless Tesla commits to $500M in local parts purchases

Tesla Model X in India
The first Tesla imported into India in 2017

New details are emerging about how far the Indian government wants Tesla to go in their commitments to local auto parts sourcing before they consider lowering import taxes on electric vehicles (EVs).

According to a source familiar with the discussions that spoke with Bloomberg, Tesla must commit to spending at least $500 million on the purchase of domestically produced auto parts.

That would a five-fold increase from current levels. In August 2021 Tesla revealed they were spending about $100 million to buy parts manufactured in India.

At the same time, Tesla committed to increase that further if import taxes were lowered, but did not specify an amount.

To help Tesla reach those levels, the government is reportedly open to starting at a lower amount, but Tesla would need to agree to increasing purchases by 10%-15% per year until a satisfactory level is achieved.

The source says that while Tesla is aware of the government’s position, they have yet to be formally told of the procurement targets.

In addition, the source says that Tesla must provide the government with a component-sourcing plan that is proportional to their forecasted sales in the country, which should include plans to export domestically produced parts to China if it wants to import vehicles from Giga Shanghai.

Discussions between Tesla and India over tax breaks have reached an impasse

Source: Bloomberg

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