India is in the process of developing a new electric vehicle (EV) policy that aims to reduce import taxes for automakers involved in local manufacturing, following a proposal by Tesla, Reuters reports.
The proposed policy could lead to lowered import taxes on fully-built EVs entering India, potentially dropping to as low as 15%. Currently, import taxes stand at 100% for vehicles costing over $40,000 and 70% for others. Tesla's suggestion has garnered interest from the government.
Although the Indian commerce ministry, which is working on the plan, and Tesla have not yet commented on the matter, the finance minister stated that there's no proposal to reduce import duties on electric vehicles.
If enacted, this policy shift could significantly lower the cost of imported EVs and expand the range of models Tesla can offer in India. The move might also encourage other global automakers, beyond Tesla, to enter India's EV market, which currently represents less than 2% of total car sales but is growing rapidly.
This potential change has already affected Indian automakers' stock prices. Tata Motors' shares fell nearly 3%, and Mahindra and Mahindra's shares dropped over 2%, dragging down the benchmark auto index.
The Indian government, however, intends to tread cautiously due to concerns that a reduction in import taxes could disrupt the market and disadvantage local players such as Tata and Mahindra, which are investing in domestic EV manufacturing. The policy proposal is in its early stages of consideration, and the final tax rate could change.
Other countries have adopted similar strategies to incentivize EV manufacturing commitments. For instance, Indonesia has offered to reduce import duties to zero for EV manufacturers planning investments, aimed at attracting players like Tesla.
Tesla's journey into the Indian market has had its ups and downs. Last year, negotiations between Tesla and the Indian government faltered when Tesla was asked to commit to local manufacturing. However, the company has recently expressed interest in setting up a local factory to produce a new, more affordable EV. Tesla's discussions with Indian officials are being closely watched, including by Prime Minister Narendra Modi, who held talks with CEO Elon Musk in June.
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