Tesla Demands Cuts On Import Taxes Before Entering Indian Auto Market: Report

International

New Delhi: Tesla Inc. has urged Prime Minister Modi to slash the taxes on imported vehicles even before it entered the Indian market, according to a Reuters report facing objections from some Indian automakers.

According to the report Modi’s officials last month had a closed-door meeting with Tesla executives which included its head of policy in India, Manuj Khurana, where they put forth the company’s demands stating that India import demands were too high.

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A Reuters source revealed, that Tesla said that India’s duty structure would not make its business in the country a “viable proposition”. The company also has also put in a request for a meeting between Musk and Modi, the report states.

India levies an import duty of 60% on electric vehicles that cost $40,000 or less, and 100% duty on those priced over $40,000. Analysts have said that at these rates Tesla cars would become far too costly for buyers and could limit their sales.

Khurana or Tesla nor the PMO have made any comment over the matter and it is not clear what exactly was discussed at Modi's office. However, government officials are divided over the U.S. automaker’s demands. Some officials want the company to commit to local manufacturing before considering any import tax breaks, stated the report. One of the sources, who has direct knowledge of the government’s thinking, was quoted as saying: “If Tesla was the only EV maker, decreasing duties would have worked. But there are others.”

A government official said lowering duties for a short period could pave the way for Tesla’s entry which could “boost India’s investor-friendly image and green credentials". 

For example, Tata Motors, recently raised $1 billion from investors including TPG to boost EV production locally. Hence there are concerns over the impact on the local auto industry as it is likely that giving Tesla concessions would be contrary to India’s plans to boost domestic EV manufacturing.

The Transport Minister, Nitin Gadkari had earlier said that Tesla should not sell China-made cars in India, to which Musk responded in July saying that he wanted to first experiment with imports. , saying that if imports succeed then a manufacturing unit in India is very likely. 

EVs in India is premium and is still in its infancy, charging infrastructure too is scarce. According to the report, only 5000 out of the 2.4 million cars sold last year were electric.