The Aryavarth Express
Agency (New Delhi): In a major win for Tesla, India has announced that it will lower import taxes on certain electric vehicles (EVs) for companies that commit to investing at least $500 million and setting up manufacturing facilities within three years. This policy is aimed at bolstering Tesla’s plans to enter the Indian market, which the company has been lobbying for in recent years.
Under the new policy, companies that meet the investment and manufacturing requirements will be allowed to import a limited number of EVs at a lower tax rate of 15% on cars costing $35,000 and above. Currently, India levies a tax of 70% or 100% on imported cars and EVs, depending on their value.
The move is expected to benefit consumers by making EVs more affordable, while also aligning with the government’s objective of reducing oil imports and foreign exchange outflows. India’s EV market is small but growing, with domestic carmaker Tata Motors dominating sales. Electric models made up about 2% of total car sales in India in 2023, and the government aims to increase this to 30% by 2030.
The new policy is a significant shift in India’s stance, as the country had previously been reluctant to lower import taxes unless companies committed to local manufacturing. Tesla’s CEO, Elon Musk, had expressed that India’s high import taxes were among the highest in the world, making it challenging for the company to enter the market.
The policy is expected to open the door for other global automakers to tap into the world’s third-largest car market, particularly at a time when the pace of EV growth is slowing, forcing companies to look for newer markets to boost sales. Vietnamese EV maker VinFast has already announced plans to invest $2 billion in India and has begun construction of a local factory.
The objective of the new policy is to “strengthen the EV ecosystem by promoting healthy competition among EV players leading to high volume of production, economies of scale, and lower cost of production,” according to the commerce ministry. This move is expected to attract multiple carmakers to enter the Indian market, giving consumers a wider choice of global technologies and products.