Indian govt considering lower taxes on imported electric vehicles after Tesla lobbying

After Tesla officially announced its entry into the Indian market earlier this year, they have been talking to the Indian government to get tax reliefs. Last month, the Union Government said that it will consider the lowering of the import duty and offer other SOPs to Tesla in the future if only they set up a manufacturing facility in India. However, the Reuters report now claims that the Indian government is now considering lowering the taxes for imported vehicles.

Indian govt considering lower taxes on imported electric vehicles after Tesla lobbying

The report says that two senior government officials have confirmed that India may lower the import duties on electric cars to as low as 40%. This comes after Tesla’s multiple appeals to the government to cut import duties for electric vehicles.

Currently, there are two slabs of import duties on electric cars. For vehicles valued under $40,000 or about Rs 30 lakh, the import duty is set at 60%. For the vehicles that are valued at more than $40,000, the import duties are currently set at 100%. The government is now considering reducing the tax from 60% to 40% for the vehicle valued at less than $40,000 and from 100% to 60% for the vehicles valued at more than $40,000.

The unnamed officials told Reuters that they are yet to decide the final import duties. However, the discussions are ongoing.

Tesla has hinted at a delay

Earlier Elon Musk replied to a Tweet requesting the launch of the Tesla cars in India at the earliest by saying that the import duties are the highest in the world in India. Musk expressed that Tesla wants to launch the vehicles as soon as possible but the high import tax is going against them. He also said that electric vehicles are getting the same treatment from the government as petrol or diesel vehicles, which is not consistent with the Indian government’s plan for climate change.

The Indian government has already said that it will consider lowering the taxes for Tesla in the future only if they set up a manufacturing unit in India. However, Musk argued that they will make a decision on setting up a manufacturing plant in India after gauging the success of the cars that they import to the country initially. Interestingly, many states have already offered land to Tesla to set up a factory in India.

Tesla to import from China

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.