Tesla may get tax exemption in India; Government to decide soon

Tesla’s intent to enter into the Indian car market is not a hidden secret anymore. While Tesla has been aggressively evaluating all the possibilities to launch in India, one of the biggest hindrances in its way is the high import duties slapped on imported cars. Tesla has already requested the Indian Government to bring down the import duties, which currently are 100 per cent for cars priced above $40,000 and 60 per cent for vehicles priced below $40,000.

According to a recent development, the Indian Government is contemplating Tesla’s proposal to cut down the import duties, at least for a short period, to facilitate Tesla’s entry into India in the initial days. However, this move will be formalized as a precursor move to encourage Tesla for setting up a manufacturing facility in India. This news has been confirmed by the CEO of NITI Aayog, Mr Amitabh Kant, in a recent conversation with Economic Times.

For those who don’t know, the NITI Aayog is the organization set by the Indian Government to decide and implement various long-term policies, strategies and programmes for the government. In addition to this, NITI Aayog also serves as a technical advisor to all the authorities and governments of Centre, State and Union Territories.

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In his conversation, Mr Kant said that all the concerned ministries involved in this proposal are studying the feasibilities and obstructions coming in the way. The final decision, however, will be inked by the revenue department of the Ministry of Finance. However, all the possibilities will be favoured for Tesla only if the American carmaker formalizes a concrete plan to set up a local manufacturing facility in India to promote the Central Government’s ‘Make in India’ initiative.

Govt wants Tesla to bring cars as CKDs

The Ministry of Heavy Industries believes that Tesla can cement its position in India by initially making its cars through the CKD route at its local assembly plants, which then can be scaled up to complete manufacturing in the later stages. However, Tesla has already negated the plans for assembling its cars through the CKD route.

It leaves only the two possibilities of following the CBU route or locally manufacturing the vehicles. If Tesla decides to stick to the CBU route, the Indian Government can offer temporary relaxation in import duties to make Tesla’s roadmap easier, which can be in action for three years. However, for that too, Tesla has to submit the expansion plans for the Indian Government for later years.

Tesla has already been testing Model 3 for quite some time on the Indian roads, which signals that it might start its Indian innings with the Model 3. In addition, Tesla is already working on a sub-$250,000 electric car, which is specially developed for emerging car markets like India. Given that it will be the most affordable car from Tesla globally, this new car will have a bigger significance for the Indian market if it gets launched here.

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