Indian Govt to Tesla: Manufacture electric cars in India to get import duty concession

The Heavy Industries Ministry of India has asked the U.S.-based electric car manufacturer – Tesla to start its manufacturing unit in India before getting any tax concessions. The government said that the centre is not offering any import duty benefit to any manufacturing.

After the central government considered offering tax benefits to the iconic electric car manufacturer, the government says that it will not be a good signal to the other companies that have invested billions of dollars in India.

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With the government starting to consider import tax duty relief for Tesla, many manufacturers present in India voiced their concern while a few others supported the concession. Tesla had demanded a reduction in import duties on electric vehicles (EVs) in India.

India’s import duty highest: Elon Musk

Elon Musk the owner of Tesla Inc had said earlier that they want to launch Tesla cars as soon as possible in the Indian market. However, the import duties are too high in the country.  “We want to do so, but import duties are the highest in the world by far of any large country! Moreover, clean energy vehicles are treated the same as diesel or petrol, which does not seem entirely consistent with the climate goals of India,” Musk said.

India currently charges custom duty ranging from 60% to 100% based on the engine size, cost, insurance and freight value of the vehicle. The completely built units (CBUs) are twice as expensive due to the import duty rules set by the centre.

While Tesla has always been a highly competitive manufacturer in foreign markets, the price of its vehicles will shoot up rapidly after the taxes and duties. The price of the Tesla cars may become one of the highest in the world in India when launched.

Tesla had requested the government to standardize the traffic on electric cars to 40% irrespective of the customs value and withdraw the social welfare surcharge of 10% on electric cars.

Tesla said that these changes would boost the development of the Indian EV ecosystem and the company will make significant direct investments in sales, service and charging infrastructure, and will also significantly increase procurement from India to supply its manufacturing facilities around the world.

Tesla’s first car

All the Tesla models in India will be imported as Completly Built Units or CBU and that is why it will attract massive import taxes and duties. The entry-level Model 3 is likely to get a price tag of around Rs 60 lakh, ex-showroom. It will become the most expensive electric sedan in India on its launch.

The first product is likely to have a price tag of around Rs 60 lakh. Since the import taxes are very high in India and Tesla will launch the car as CBU,  it will command a high price tag. Tesla has set up a Gigafactory in China and the products are likely to be imported from there. If Tesla ever builds a manufacturing facility in India, the price of the vehicles may come down to Rs 30 lakh but that might take years to happen.

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