The war of words continues between Tesla Inc’s CEO Elon Musk and the union minister of the Ministry of Road Transport and Highways of India, Nitin Gadkari. The MoRTH chief recently shared a message for the Tesla supremo that if his company can produce electric vehicles in India then there is ‘no problem’, but it must not import automobiles from China to sell in the nation. The minister during an interactive session at the Raisina Dialogue stated that India is a massive market with a lot of potential for all-electric vehicles.
Nitin Gadkari during the session said, “If Elon Musk (Tesla CEO) is ready to manufacture in India then there is no problem … Come to India, start manufacturing, India is a large market they can export from India,” He further added, “But if he wants to manufacture in China and sell in India, then it cannot be a good proposition for India,”
This message has been sent by the MoRTH minister in return to the Tesla CEO’s request for reducing import duties on his company’s electric vehicles. Currently, vehicles imported as completely built units (CBUs) are subject to customs duties ranging from 60% to 100%, depending on the engine size and cost, as well as the value of insurance and freight (CIF) less than or greater than USD 40,000.
In a letter to the road ministry last year, the US-based electric auto giant claimed that the effective import duty of 110 percent on cars with a customs value of more than USD 40,000 is “prohibitive” for zero-emission vehicles. The company then asked the government to lower the tariff on electric automobiles to 40%, regardless of the customs value, and to eliminate the 10% social welfare fee on electric cars.
Tesla also stated that these adjustments in the rules will help the Indian EV ecosystem’s growth, and further down the line the company will make significant direct investments in sales, service, and charging infrastructure. Tesla has also said that it will also considerably increase procurement from India for its worldwide operations.
According to the EV maker’s argument, there is currently no Indian OEM that manufactures a car, either EV or ICE with an ex-factory price beyond USD 40,000 (approximately Rs 30.6 lakh), and barely 1-2 percent of automobiles sold in India be it EV or ICE, have an ex-factory/customs worth above USD 40,000, according to the business.
Earlier in the year, Tesla chief Elon Musk also asked the government of India to reduce the taxes but contrary to his demand, the government of India asked his company to commit to sourcing at least $500 million of auto components from the Indian domestic market.
A person close to the decision-makers at the time revealed that the EV producer has been given the condition that it can start procuring local auto parts at a lower base but it will have to agree to ramp up the Indian parts purchases by around 10 per cent to 15 per cent a year until a satisfactory level is achieved.
In addition, the Indian government has explicitly instructed the American automaker to increase domestic sourcing. Tesla did not directly reply to the proposal at the time, although the corporation did claim in August of 2021 that it had successfully acquired roughly $100 million worth of car components from India for its electric vehicles.