India Considers Sharp Import Tax Cuts on EVs after Tesla’s entry: Report

India is reportedly considering Tesla’s proposal to greatly reduce import duties for electric cars, which would enable the automaker to finally enter the market. Tesla has been talking about entering the Indian market for years, but regulations have slowed down their efforts. Now, India is considering slashing import duties on electric cars to as low as 40%, two senior government officials told Reuters, days after Tesla Inc’s appeals for a cut polarised the country’s auto industry.

One of the officials explained, “We haven’t firmed up the reduction in duties yet, but there are discussions that are ongoing.” For the tax rates, however, two options are being talked about. The first is that for imported EVs that have less than $40,000, the discussion covers slashing the rate to 40% from the present 60%. It should be noted that the $40,000 includes the car’s cost, insurance, and freight.

The other option is for EVs valued at over $40,000. Officials said that the government is considering cutting the rate to 60% from 100%. The article noted that India’s government is in favor of a cut only if it can see companies such as Tesla giving some benefit to its domestic economy. One way for Tesla to do this is to manufacture locally or give a timeline of when it would be able to manufacture there.

“Reducing import duties is not a problem, as not many EVs are imported in the country. But we need some economic gain out of that. We also have to balance the concerns of the domestic players,” the official told Reuters. The second official explained that since the duty cut is being considered only for EVs, it shouldn’t be an issue for domestic automakers that manufacture affordable ICE (internal combustion engine) vehicles.

The article also interviewed another source — someone reportedly familiar with the government’s thinking. This person explained that there was an awareness that a brand such as Tesla can make EVs more popular in India, which is behind other major auto markets in terms of EV sales.

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