BT Exclusive: India mulls lowering import duty to drive in Tesla cars, say govt sources

India is actively considering allowing the import of Tesla cars at a much lower duty than prevailing rates for a specific period of time in order to encourage Elon Musk’s pioneering electric car company to eventually set up a manufacturing base in India.

Top government functionaries have told Business Today TV that Tesla may be allowed to import fully built cars at a concessional import duty of around 15-20 per cent, much lower than the prevailing 100 per cent duty that such imports normally attract.

However, this would be contingent upon Tesla setting up a plant to manufacturing plant in India. In the event that Tesla fails to fulfil this condition, the Indian government would recover the entire duty benefits from the firm.

“Company representatives have pointed out that a 100 per cent duty on an electric vehicle would defeat the very purpose of developing an alternative to existing fuel vehicles,” the official said, adding that the matter has received consideration at the highest levels of the Indian government. A final decision in this regard may be taken soon.

At present, all car imports attract 70 per cent import duty for vehicles up to $40,000, while cars above $40,000 attract a 100 per cent import duty.

On their part, Indian electric vehicle manufacturers including Tata Motors and M&M have pointed out that they are already manufacturing electric automobiles and raised the issue of why Tesla should receive any special treatment. Indian companies have sold 56,927 electric four-wheelers and over 530,000 lakh electric two-wheelers from April to November this year.

Industry sources say a duty advantage for companies like Tesla could prove to be a setback for domestic manufacturers, given that they have already committed significant investments for manufacturing electric vehicles and components in India.

A lower-duty import regime could result in a major reduction in the prices of fully-imported electric cars, not only benefiting Tesla, but other players like Mercedes and BMW as well, the sources added.

An important consideration weighing in favour of Tesla is that India is keen to attract this pioneering company and encourage it to set up a base in India. “A Tesla plant will go a long way in reinforcing the make-in-India theme and send a signal about the country as a viable manufacturing destination globally”, the official said, adding that Indian car manufacturers also have access to global markets and technology.

“Tatas have Jaguar, while another plant in India is being eyed by an Indian company. Indian automakers have many years of experience and have benefitted with policy support and protection for many years”, he said.

Meanwhile, India is also considering tweaks to the production linked incentive (PLI) scheme for advanced cell chemistry batteries. Approved in May 2021, the scheme for manufacturing advanced chemistry cell batteries had an outlay of Rs 18,100 crore with the primary objective of attracting foreign and domestic investment of Rs 45,000 crore. These are a new generation of advanced storage technologies that can store electric energy either as electrochemical or as chemical energy and convert it back to electric energy as and when required.

In addition, another PLI scheme for EV batteries is also in the works, senior officials have said in the past.