Speculations have been rife about Tesla’s entry to India. But Elon Musk pointed to the bone of contention that’s stalling Tesla’s entry to India: import duties. He said recently that Tesla wants to come to India but the import duties are by far the highest in the world and hoped for a temporary relief on tariffs. While there are many takers for his argument -- rates in India are indeed exceptionally high -- there’s an equally clear chorus urging the government to not make changes in import duty.
Currently the rates are 60 per cent for cars priced below $40,000 and 100 per cent of those above $40,000. Only one model of Tesla, Model 3 Standard Range Plus, is priced below $40,000, meaning that it would need to pay as much as 100 per cent for the rest.
While the rates go up as much as 100 per cent in India, countries like the US and Australia have single-digit rates. In the US, import duties amount to 2.5 per cent only, while in Australia it is 5 per cent. Canada levies duty of 6.1 per cent, Russia 9.1 per cent and France 10 per cent.
Rates are significantly higher in Saudi Arabia at 15 per cent, China at 22.8 per cent, and Brazil at 35 per cent. Even with exorbitant rates in Pakistan at 50-75 per cent and 75-95 per cent in Iran, they fall short of India’s levy.
India has kept import duties high so as to boost local manufacturing. Tesla had reportedly written to Indian ministries too about the lowering of import duties. In a letter to think tank Niti Aayog, the company proposed slashing of import duties of fully assembled electric cars to 40 per cent.
Other luxury carmakers had also in the past lobbied the government to lower taxes on imported cars, but there was little headway.
But there are EV-related benefits in India
Road tax amounts to zero in many states. GST on EVs have been slashed to 5 per cent from 12 per cent and 5 per cent from 18 per cent on chargers and charging stations. The government also allows an income tax reduction of Rs 1.5 lakh on interest paid for loans on EVs.
This debate on import duties has split industry leaders as well. Bhavish Aggarwal, whose company Ola recently forayed into the EV space, has batted for high rates. He said India needs to believe in its capacity to build indigenously, in response to Tesla’s call for lower duties.
Hyundai MD SS Kim, on the other hand, backed Musk. He said that the company is developing a Made in India affordable mass market EV but said that it would take some time. Kim said that the government’s reduction in duty would help them create demand and market.
Meanwhile, Tesla’s entry into India does not seem unlikely given how it introduced Hindi language in Tesla’s infotainment UI. Screenshots of the update that showed the screen of a Tesla car with commands in Hindi made rounds on social media. It had also added other languages such as Russian, Greek, Croatian and Finnish. It additionally elevated Prashanth R Menon as director of India operations in May this year. He is likely to oversee Tesla’s introduction in India.
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