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Govt asks Tesla to start production in India first before getting any tax incentives

Elon Musk’s electric carmaker Tesla has reportedly been advised by the Indian government to first begin manufacturing operations in India before considering tax incentives. The company that intends to sell cars in India is concerned about high import charges on electric vehicles (EVs), which would drive up the price of its vehicles to unprecedented rates.

Tesla Motors Logo on Its Electric Car

Source: Acti World

According to a media report quoting government sources, allowing tax incentives to Tesla will send a negative impression to other automobile manufacturers who are adhering to the import tax rate imposed by the Indian government. The new decision comes just days after it was reported that the central government was considering granting Tesla some relaxation by lowering import tariffs.

The California-based automaker has urged for a concession in India’s import tariffs on electric vehicles (EVs). Elon Musk, the CEO of Tesla, tweeted in July that he wished for “temporary tariff relief for electric vehicles.” Musk previously stated that Tesla aims to sell its cars in India as soon as possible, but that India’s “import duties are by far the highest in the world of any large country!”

Currently, India slaps a 100% import tariff on fully imported cars having a CIF value of more than $40,000 and a 60% levy on vehicles with a CIF value less than that amount. CIF is the overall cost of a car, including, engine size, insurance, and freight. The Government of India proposed adjusting the tax rate for imported electric vehicles with a value (CIF) of less than $40,000 to 40% from 60% till last month. The government was considering lowering the import tariffs rate on electric vehicles costing more than $40,000 from 100% to 60%.

Tesla subsequently wrote a letter to the government policy think tank Niti Aayog, requesting the organization to reduce the import duty on totally assembled electric cars from 100% to 40%. Hyundai India MD and CEO SS Kim praised Musk at the time, saying that a concession in the government’s tariff rate on imported electric vehicles would facilitate OEMs foster market demand and scale.

Interestingly, Bhavish Aggarwal, CEO of Ola Electric, strongly disagreed with Musk and Kim, indicating that India should avoid importing EVs and instead manufacture them in-house to attract global OEMs.

Given the country’s priority on e-vehicles, Union Minister Nitin Gadkari has remarked that Tesla has a delightful opportunity to develop a production plant in India. Tesla is already sourcing several auto components from Indian automakers, and building a facility here would be economically feasible for the company, according to the road transport and highways minister.

Tesla India Motors and Energy, the India division of Tesla Inc., has granted approvals for four of its car models, according to information published by the Centre-controlled Vahan Sewa. However it is not disclosed which models or variants have been granted approval, Tesla test vehicles such as the Model 3 and Model Y have already been tested on Indian roads.

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