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Tesla proposes to change India EV import tax policy for EV makers who commit to invest

India is in the process of formulating a new electric vehicle policy that could lower import tax for automakers willing to establish local manufacturing operations.

This move comes in response to a proposal by Tesla to enter the Indian market. The proposed policy could significantly reduce import taxes on fully-built EVs, potentially attracting global automakers beyond Tesla.

Under the new policy being considered, automakers may be allowed to import fully assembled EVs into India with a reduced tax rate of as low as 15 percent, a significant decrease from the current rates of 70 percent to 100 percent.

The existing tax structure imposes a 100 percent tax on cars priced above $40,000 and a 70 percent tax on cars below that threshold. The move aims to incentivise companies to set up local manufacturing operations, contributing to India’s vision of promoting electric mobility.

Tesla’s interest in entering the Indian market has played a pivotal role in sparking discussions about revising import tax policies. The proposed reduction in import taxes could potentially allow Tesla to sell its full range of EV models in India, expanding its market presence beyond the introduction of a single locally-produced model.

Tesla’s willingness to manufacture locally has opened these discussions, with the company reportedly expressing its desire to set up a local factory and develop an affordable EV specifically for the Indian market.

While the potential policy change is promising, Indian authorities are taking a cautious approach due to potential disruptions in the market. The shift in import tax rates could impact local manufacturers like Tata Motors and Mahindra, which have invested in domestic EV production. The Indian government is keen on striking a balance between encouraging global players like Tesla and supporting domestic manufacturers.

Other countries have employed similar strategies to encourage EV manufacturing commitments. Indonesia, for instance, has offered to eliminate import duties for EV manufacturers planning significant investments, a move aimed at attracting players like Tesla.