Looking to boost domestic manufacturing, the Central Government is reportedly considering offering import duty reductions to companies like Tesla on fully built units during the initial stages, as per a report released on Wednesday.
According to sources, the government may establish a policy framework targeting technologically advanced vehicle manufacturers that involves local sourcing.
As outlined in a report by TOI, import duty on green cars could potentially be reduced from 100% to as low as 15% if carmakers agree to commence manufacturing their vehicles in India and source components locally.
“Furthermore,” the source told TOI’s Pankaj Doval, “the government will also require companies to commit to creating a supplier ecosystem, with approximately 20% of parts being sourced locally within the first two years, increasing to 40% by the fourth year.”
Should this policy be implemented, it could open up possibilities for Tesla, BMW, and Audi to launch their electric car plans in India.
An earlier report by ET revealed that Indian officials were reluctant to grant duty cuts to Tesla unless the company committed to local investment. Tesla had requested a 40% import duty on fully assembled electric cars, in contrast to the existing rates of 60% for cars priced below $40,000 and 100% for those above.
Tesla desires equal treatment with electric vehicles rather than being classified as luxury cars. India’s current customs duty structure does not distinguish between electric cars and those powered by hydrocarbons, resulting in high duties aimed at encouraging local manufacturing.
Last year, Tesla’s attempts to enter the Indian market faltered due to high import tax rates. Talks between the company and the Indian government collapsed when officials indicated that Tesla would need to commit to local manufacturing first.
In June of this year, Elon Musk, the CEO of Tesla, met with Indian Prime Minister Narendra Modi and expressed his confidence in Tesla’s entry into India. He stated, “I am confident that Tesla will be in India and will do so as soon as humanly possible. We do not want to jump the gun on an announcement, but I think it is quite likely that it will be a significant investment in our relationship with India.”
Tesla revived discussions about establishing a manufacturing base in India in 2023 after shelving plans to enter the market last year due to high import tax structures.
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