Tesla Now Closer to India Launch, as Government Nears Final Plan to Reduce Import Tax

Tesla is one step closer to launching in India. The country’s government is close to finalizing a policy to extend preferential import duties on electric vehicles costing more than Rs 30 lakh (about US$36,000) for 2-3 years.

According to a report by The Economic Times, reduced import duties will likely be offered to Tesla instead of bank guarantees for its proposed investment in building an electric vehicle factory in India. The publication refers to people who are familiar with the discussions.

Currently, India levies 100% import duty on vehicles whose insurance and shipping costs exceed US$40,000. For cars priced below this threshold, the duty is 60% of their value. It is reported that Tesla is ready to invest up to $2 billion if the Indian government offers a reduced import duty of 15% on imported electric cars in the first two years of operations.

The government is interested in foreign investment. It is seeking to accelerate plans to boost local manufacturing to boost job creation while lowering EV prices throughout India.

“The government is looking at reducing import duties temporarily, based on bank guarantees. The quantum of the bank guarantee has not been determined (yet), but the thought is that this will help ensure that companies make timely investments and set up local factories,” said one of the persons cited above.

Local automakers are afraid of Tesla’s entry into the Indian market. Industry representatives have not yet formally expressed any objections to the government. However, some automakers are concerned that any reduction in import duty would result in an unfair advantage for Tesla.

Last month, Mahindra & Mahindra (M&M) managing director, Anish Shah, said his company had made representations to government officials saying global electric vehicle makers needed to be pushed to invest in India.

“It should be a level playing field… investing in India is important. Our approach is essentially to create a stronger industry in India, and not to be in a situation where manufacturing is done outside India, and India just becomes an importer of products,” Shah said at the World Economic Forum in Davos, without referring to Tesla by name.

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